Tuesday 14/05/19

1. In MACRO & CRYPTO NEWS, the US-China trade talks hit stocks, world economies slow and Bitcoin powers up
2. In CAR-RELATED NEWS, Uber has a rough time while Honda and Ford confirm UK job losses
3. In FOOD AND DRINK NEWS, Impossible Foods gets a cash injection and AB InBev gets a big EU fine
4. In INDIVIDUAL COMPANY NEWS, Apple faces an antitrust case and Bayer gets fined
5. In OTHER NEWS, I bring you a fun-sounding (but dangerous) slide. For more details, read on…

So US-China talks dent markets and world economies slow while Bitcoin strengthens…

US stocks fall sharply as US-China trade war escalates (Financial Times, Don Weinland, James Politi, Joe Rennison and Richard Henderson) shows that the game of chicken currently being played by presidents of two of the world’s superpowers is heating up as China retaliated against America’s recent tariff hikes with hikes of its own on $60bn of American goods, due to take effect on June 1st. This prompted the biggest fall in share prices since January as investors scrambled to put their money into safer assets as China’s currency and those of emerging markets also lost ground. I think that Bernard Baumohl of Economic Outlook Group put it best when he said that “The confrontation has now escalated to a battle of testosterone between two leaders who believe they have much to prove to their constituents. But the longer this exhibition of chest-beating lasts, the greater the odds of a US, if not global, recession”.

Talking of which, World’s big economies slowing (Daily Telegraph, Tim Wallace) cites conclusions drawn from the Organisation for Economic Co-operation and Development’s growth index which show that growth rate in the US, Japan, Canada and the Eurozone is now at its slowest since September 2009. This index is supposed to be used to predict growth patterns in the next six-to-nine

months. Interestingly, growth in China and India appears to be stable, Brazil is improving – as is France, which is a bright spot in an otherwise sluggish Europe. Economists aren’t yet predicting recession, but they are cutting growth forecasts. * SO WHAT? * Things like this shouldn’t be taken as Gospel as economists change their forecasts all the time. However, it doesn’t take a genius to predict that economies will suffer more damage the longer the US-China trade stand-off continues. Conversely, if they manage to surprise everyone with a reasonable deal, I would expect a relief rally – and then maybe localised dips as individual markets start to realise that Trump will be training his sights on them in terms of tariffs. Europe is expected to be Trump’s next “target” after he deals with China, so I would have thought that any kind of post-China euphoria will be short-lived.

I talked a bit about this yesterday on Watson’s Daily TV but Bitcoin fired up by wild weekend (The Times, James Dean) highlights recent moves for the cryptocurrency as it rocketed up to a ten-month high as its value has almost doubled from the $3,689.56 level it was at at the beginning of this year. There’s not much by way of explanation of this latest hike although some spoke of particularly big trades done over the weekend. * SO WHAT? * Fidelity, the asset management group, is due to begin trading bitcoin for institutional investors in the next few weeks – and if this gains momentum, others will follow and bitcoin will be brought closer to the mainstream as increased prevalence will give it legitimacy.

Uber’s disappointment continues while Honda and Ford announce UK job losses…

False start for Uber in first week (The Times) sums up Uber’s poor share price performance since it made its stock market debut last week. Shares fell another 10% in trading yesterday and they are now almost 18% down on the $45 they floated at on Friday. Talk about a let down after all that hype! Still, all the companies that worked on the deal made $106.2m in fees, according to a regulatory filing yesterday. Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch made $40.6m, $21.2m and $10.5m respectively. * SO WHAT? * Actually, that doesn’t sound like a lot of money really when you think of the size of the offering, but I think that getting the bank’s name on the deal helps them to get more business for other flotations that are far more lucrative. After all, $40.6m is probably what Morgan Stanley pays out to one of its teams in bonuses alone! I am sure that these advisers will also continue to make more money out of the deal as time goes on, but this just represents some of what they’ve earned so far. I think that Uber has been overhyped but then again I suspect that it’ll reach a level where investors will start to take a nibble as future growth prospects start to look more

attractive. Uber needs some kind of win soon, though, to get it out of its current rut.

There’s more bad news for workers in the automotive industry in Honda axes 3,500 jobs (Daily Telegraph, LaToya Harding) as the Japanese company confirmed that it will shut down its plant in Swindon in 2021 with the loss of 3,500 jobs following a consultation with the government and other organisations. The plant made 160,000 Civics and CR-V models last year, accounting for just over 10% of UK car production. Ford to cut hundreds of jobs in Britain (The Times, Robert Lea) is obviously on a smaller scale but around 550 managerial and white-collar jobs are to be culled at Ford UK. This is in addition to another 400 workers being axed from Ford’s Bridgend factory. * SO WHAT? * This has been on the cards for a while now as automotive manufacturers continue to suffer with a multitude of problems at the moment what with a slowing global economy, increased costs for labour, R&D and compliance with ever-tightening emissions regulations and a potential change in the way people “own” cars. Big tariffs on raw materials and car imports that are caught up in the latest US-China trade shenanigans aren’t helping sales either. With the best will in the world, it would have been difficult to see how any motor manufacturer could have come to any kind of deal given that Jaguar Land Rover and Vauxhall are also facing their own problems at the moment. 

Impossible Foods raises more money and AB InBev gets fined…

Plant-based meat group Impossible Foods raises $300m (Financial Times, Emiko Terazono) highlights the company’s latest success as this latest cash injection from a group led by Temasek and Horizon Ventures increased its value by two-thirds to $2bn. The fundraising came shortly after Impossible Foods announced its distribution tie-up with Burger King in the US where the latter is rolling out the “Impossible Whopper” to over 7,000 restaurants. Impossible was founded in 2011 by Pat Brown, a Stanford University professor and the company aims to negate the need for animals in the food chain by 2035. * SO WHAT? * This whole area of whole meat-free-substitutes is sizzling right now – rival Beyond Meat’s flotation earlier this month has been wildly successful as the share price has almost trebled. If you believe that demand for the product will continue (and it sounds like Impossible is having trouble making their burgers fast enough) then I guess that the big spends are going to be on manufacturing for the most part as well as R&D in order to make new products, so losses

may continue for some time yet. I think this is such an exciting new area with huge possibilities for health as well as the agriculture and food industry at large – but will spell longer-term trouble for farmers and meat-packers. Let’s hope that there aren’t any scandals involving the pea/mushroom protein these companies use otherwise things could go south pretty quickly.

Brussels fines brewing giant for blocking cheap beer imports (Daily Telegraph, Oliver Gill) heralds the conclusion of a three-year investigation into the supplier of Jupiler, a beer that is brewed by AB InBev. Competition Commissioner Margrethe Vestager said that “Consumers in Belgium have been paying more for their favourite beer because of AB InBev’s deliberate strategy to restrict cross border sales between the Netherlands and Belgium…Attempts by dominant companies to carve up the single market to maintain high prices are illegal”. * SO WHAT? *  Jupiler has a 40% market share in Belgium, so this has been a big deal. AB InBev got a €200m fine for their troubles, so no doubt many Belgiums will be raising a glass in celebration! Other brewers may well be checking that they won’t fall foul of the same thing now there is a precedent…

Apple faces another investigation and Bayer gets a massive fine…

Apple’s lawyers are going to be even busier than usual as Apple loses bid to end app antitrust case in Supreme Court (Wall Street Journal, Brent Kendall and Tripp Mickle) shows that consumers will be free to sue Apple as the antitrust suit ruled that consumers are forced to pay higher prices because Apple stipulates that all phone software should be bought and sold via the App. The lawsuit contends that apps would be cheaper if software developers could sell them directly to the customer and bypass Apple altogether. Apple currently takes a 30% cut of every app it sells and a 15% cut of subscriptions after subscribers’ first year. * SO WHAT? * If this goes ahead, it could change the way that apps are sold and mean that

Apple could be liable for some biiiig damages, but we won’t know for sure for at least a year or two when a final decision will be made. Anecdotally, I was actually thinking of launching Watson’s Daily as an app last year, but the steep 30% cut that Apple takes put me off – plus you have to jump through SO many hoops to even get your app on there compared to, say, getting it on Google Play. I may yet go down this road, but Apple really does take the p!ss IMHO.

In latest Roundup herbicide defeat for Bayer, jury awards California couple $2 billion (Wall Street Journal, Sara Randazzo and Ruth Bender) gives Bayer yet another kick in the teeth as a jury yesterday awarded just over $2bn to a couple who blamed Bayer’s Roundup weedkiller for causing their cancer. Bayer bought the maker of Roundup, Monsanto, last year and probably wished it hadn’t as the cases have been piling up.

And finally, in other news…

I thought I’d leave you today with something that sounds like fun but is practical (and now dangerous, apparently) in Oh, chute! 125ft slide linking streets in Spain closes after riders hurt (Sky News https://tinyurl.com/y3beor7j). It reminds me of that Barclaycard advert a few years back! Perhaps that was the inspiration??