Tuesday 13/11/18

  1. In MARKETS AND OIL NEWS, Wall Street takes a tumble while the Saudis talk less oil and the IEA talks peak oil
  2. In TECH NEWS, Apple’s shine is dulled by suppliers, Amazon picks its HQ2 and SAP buys Qualtrics
  3. In INDIVIDUAL COMPANY NEWS, tobacco shares suffer from menthol withdrawal, SoftBank plans a float, Tesla UK makes money and Beyond Meat brings its vegan burgers to the UK
  4. In OTHER NEWS, I bring you some pet photos. For more details, read on…



So Wall Street wobbled and there’s some chat on oil…

Technology jitters sends Wall Street tumbling (The Times, James Dean) highlights weakness in the US markets as shares in the likes of Amazon, Apple and others fell on bits of bad news (which I’ll go into later). * SO WHAT? * Some observers see this as the end of tech’s long bull run but I still believe that the drivers that got them to those dizzy heights are still there. Clearly there are some ongoing data privacy issues and trade-war related bumps in the road, but I don’t see there being any fundamental change in what they are doing.

Oil prices recover after Saudis say production needs to fall (The Guardian, Adam Vaughan) heralds the likely short term (at least) direction for the oil price as Saudi Arabia’s energy minister, speaking after the weekend’s OPEC meeting, talked about cutting production. Khalid al-Falih said that US sanctions on Iran didn’t cut out quite as much capacity as originally expected because the Americans issued sanction waivers for eight Iranian crude importers, plus US oil production is currently hitting new

records. Any formal production cuts are likely to be announced at the next meeting of OPEC, scheduled for 6th December in Vienna.

Oil use in cars set to peak within seven years (Financial Times, Anjli Raval and David Sheppard) is an interesting article that highlights the International Energy Agency’s prediction despite the number of vehicles on the road increasing as populations grow and wealth being spread more widely. The IEA contends that peak oil will occur because of the increased adoption of EVs and more fuel-efficient cars, which will offset bigger driver numbers. In another interesting prediction, it said that total consumption for all motor vehicles, aeroplanes, ships, trucks and the petrochemicals sector between now and 2040 will grow at half the rate it has done over the last twenty years. * SO WHAT? * Sounds interesting, but as I’ve said many times before, everyone needs to get their charging networks sorted for EVs to get proper widespread adoption. In the meantime, I would expect more fuel-efficient cars and hybrids to ramp up in popularity. Battery-makers, battery raw material suppliers and charging network installers should be making a ton of money in the next few years. They will either do it under their own steam or be bought out by oil majors looking to futureproof themselves.



In tech news, Apple suffers supplier blues, Amazon announces its HQ2 and SAP buys Quatrics for a tidy sum…

In Apple shares sink after iPhone suppliers lower outlooks (Wall Street Journal, Tripp Mickle) we see further weakness in Apple’s share price after suppliers Japan Display (which supplies screens for the iPhone XR) and Lumentum Holdings (which makes facial recognition components for iPhones) lowered earnings forecasts due to shipments being reduced, although neither mentioned Apple by name. * SO WHAT? * Everyone has looked at Apple supplier shipments as a lead indicator to Apple device unit sales for quite some time now. Given that consensus is that the smartphone market is maturing, it is unsurprising that suppliers will be feeling the heat. Some say that the maturing smartphone market led to Apple’s recent decision NOT to release unit sales data any more and I believe that this will mean that investors will be monitoring suppliers much more closely in order to make their own best guesstimates which will, in turn, make for very wide variations in company valuations.

It’s boring (unless you are a landlord in these locations, in which case you’ll be wanting to party), but Amazon picks New York City, Northern Virginia for its HQ2 locations

(Wall Street Journal, Laura Stevens, Keiko Morris and Katie Honan) brings a close to the massive guessing game that started when the e-tailer announced last year that it wanted another HQ. The official announcement is expected today. Other big projects for cities outside these two are also expected to be announced. 238 candidates threw their respective hats in the ring at the beginning, they were narrowed down to 20 in January since which time there has been a lot of jockeying for position. The main surprise here is that the company chose two locations and not one and will spread the 50,000 jobs equally between the two locations.

SAP snaps up US survey firm Qualtrics for $8bn (Daily Telegraph, Matthew Field) highlights the rather dramatic news that Europe’s most valuable tech firm SAP bought US survey company Qualtrics for $8bn just days before the US company was to float at an estimated valuation of $5bn. Qualtrics makes survey and research software for 9,000 enterprise customers. Qualtrics’ proposed float was due to follow its biggest rival, Survey Monkey, that went public in September for a $1.25bn valuation. * SO WHAT? * This seems to be the latest in a string of acquisitions by software companies of fast-growing start-ups in a frenzied bid to make sure they stay relevant. IBM recently bought open-source provider Red Hat for $34bn and Microsoft bought GitHub for $7.5bn whilst Adobe bought secured marketing software company Marketo for $4.75bn.



BAT suffers a menthol hangover, SoftBank prepares to float, Tesla UK makes money and Beyond Meat comes to the UK…

Tobacco shares go up in smoke amid US crackdown plan (The Guardian, Mark Sweney and Jasper Jolly) brings attention to the falling share prices of both British American Tobacco (which makes Lucky Strike, Dunhill, Rothmans and Benson & Hedges etc.) and Imperial Brands (which makes Lambert & Butler, Davidoff, Gauloises and John Player Special etc.) as US regulators make moves to restrict the sale of flavoured e-cigarettes and menthol cigarettes. They fell by over 10% and 3% respectively as the market digested the news that came out over the weekend. Philip Morris International (which makes Marlboro) and Altria Group (which runs Philip Morris brands) were also weaker in trading yesterday as the US Food and Drug Administration (FDA) announced that it will ban most flavoured e-cigarettes in shops and bring in a future ban on menthol cigarettes, which will take longer to be finalised. * SO WHAT? * There certainly seems to be a tightening trend in tobacco regulation at the moment and it will be interesting to see whether this approach is adopted in other international markets.

SoftBank plans £16bn float for its mobile phone arm (Daily Telegraph, Matthew Field) brings us news of the Japanese tech company’s intention to float its mobile business, SoftBank Corp, on the Tokyo Stock Exchange.

This is likely to be the biggest share listing in Japan’s history. It will list on December 19th, but the price is to be announced on December 10th. * SO WHAT? * The float will provide SoftBank with more funds to put into its tech investments and ease its transition from legacy internet company to investment giant.

Tesla UK drives into profit as British buyers choose electric (The Times, Harry Wilson) highlights the doubling of revenues last year at Tesla’s British arm after the company delivered 4,500 vehicles to its customers. This helped it to a profit of £809,835 in 2017 having made a loss of £154,619 one year earlier. * SO WHAT? * This is just incremental good news, but good news nevertheless.

Vegan start-up Beyond Meat launches UK expansion (Financial Times, Emiko Terazono) heralds the arrival on UK shores of US plant-based “meat” start-up Beyond Meat as it is to start selling its chilled and frozen products through 350 Tesco stores. Beyond Meat is one of an increasing number of alternative protein companies surfing the vegan wave and includes players such as Impossible Foods (which is, like Beyond Meat, plant based) and Memphis Meats (which makes meat from animal cells). The burger will also be made available in Honest Burger and All Bar One in the UK. * SO WHAT? * This sounds amazing, don’t you think? I guess it will all be about the taste, and I’ve never had one myself so I can’t comment. When I have one, I’ll do a little review and let you know! If it lives up to its hype it could be amazing.



And finally, in other news…

Sometimes, I think you need to give in to your inner fluffy bunny. Today is such a day, so I thought I’d bring you Animal lovers share adorable photos of ‘what their pet’s dating app picture would be’ (Evening Standard, Jacob Jarvis https://tinyurl.com/ybzumkou). Ahhhhhhhhh!

Some of today’s market, commodity & currency moves (as at 0805hrs 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 **
7,053 (-0.74%)25,387 (-2.32%)2,726 (-1.97%)7,20111,325 (-1.77%)5,059 (-0.93%)21,811 (-2.06%)2,633(+0.11%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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