Tuesday 14/07/20

  1. In POLITICAL NEWS, Putin postpones his spending plan, Duda is re-elected as Polish president and HK-to-UK immigration numbers are expected to hit 200,000
  2. In CONSUMER/RETAIL NEWS, Nationwide starts offering 90% mortgages again, UK retail sales edge higher while Boohoo and fast fashion get a kicking
  3. In TECH NEWS, Analog buys Maxim for over $20bn, Google plans to invest $10bn in India and SoftBank considers deals
  4. In INDIVIDUAL COMPANY NEWS, PepsiCo does well on snacks, Universal launches its new streaming service and G4S cuts jobs
  5. AND FINALLY, I bring you a great nature theme park and some classic album covers (with a twist)…



So Putin postpones, Duda is re-elected and HK/UK immigration numbers are forecasted…

*** BTW, did you know I do a podcast? You can listen to it on Apple Podcasts, Spotify and, since yesterday, Google Podcasts. At the moment it’s a weekly roundup, but there will be more content to come…Also, if you DO like the podcast please write me a nice review with a few comments as to WHY you find it interesting/useful! It REALLY helps and I would appreciate your input 👍***

Putin delays $360bn spending plan as Covid-19 batters economy (Financial Times, Henry Foy) shows that Russian president Putin has, shortly after successfully pushing through the reforms that will keep him in power until 2036, decided to postpone his proposed $360bn national investment plan! The coronavirus pandemic has tipped Russia into recession – so he has delayed the massive plan for six years!!! * SO WHAT? * The National Projects plan was unveiled two years ago and was supposed to provide a much-needed boost to GDP growth and overall living standards. The tough times will continue, especially if the oil price stays low. Russia really needs oil revenues to finance any kind of meaningful initiatives.

Elsewhere, Andrzej Duda wins re-election as Polish president (Financial Times, James Shotter and Agata Majos) highlights Duda’s re-election (that had a 70% turnout) by a very thin margin. Almost all the votes have been counted now but the election has really divided opinion – especially between big cities and smaller towns. He won 63.9% of the vote in the countryside and 64.1% in towns with fewer then 10,000 inhabitants. The election was supposed to happen on May 10th, but it was postponed for two months due to the coronavirus outbreak. Given how close the result was, I doubt that this will put an end to any in-fighting.

Then in Hong Kong migration to UK could hit 200,000 (Financial Times, George Parker) we see that internal Foreign Office estimates suggest that around 200,000 Hong Kong citizens with British passports could come to live in the UK over the next five years. The UK government confirmed this month that it would provide a “route to citizenship” to roughly 3m Hong Kong citizens with British National Oversees passports. * SO WHAT? * This is just an estimate – and the government has got these things wildly wrong in the past. Still, the fact that the offer is there is an annoyance to the Chinese government at a time when the UK is probably going to annoy them even more by cutting Huawei out of 5G. I wonder what the retaliations will be…



Nationwide scrambles to take advantage of the higher stamp duty threshold, retail sales go higher but fast fashion stumbles…

Nationwide to offer low-deposit mortgages after stamp duty move (The Guardian, Hilary Osborne) shows that the building society has decided to cut its recently-raised minimum deposit requirement for first-time buyers after Sunak’s announcement last week of the stamp duty holiday. Although they are now offering 90% mortgages, there are extra conditions for first-time buyers. They must be buying a house that is at least two years old, must not be wholly reliant on a deposit gifted by family and cannot be on the government’s furlough scheme. There will also be additional affordability checks. * SO WHAT? * Clearly, Nationwide wants a piece of the action that has potential to get frenzied following Sunak’s move last week. The additional hurdles will no doubt protect them to a reasonable extent and I would have thought that another lender coming back into the first-time buyer space will be a positive for the property market.

UK sales in June show signs of recovery after covid lockdown (The Guardian, Richard Partington) signals an upturn of sorts as the latest figures from the British Retail Consortium and KPMG show total sales up by 3.4% versus the same month last year as consumers returned to the high streets. Separate figures from Barclaycard showed that spending on non-essential items was down 22% in June versus a year ago, but it was a smaller decline than in

May. This is good news, but it will be better if spending continues to rise (preferably at an increasing rate!).

However, Boohoo shares drop 18% as new Leicester factory reports threaten sales (The Guardian, Sarah Butler) shows that sentiment is still fragile on Boohoo as new reports show problems in a city where the company gets a lot of its stock from. Quiz suspends supplier after £3-an-hour claims (The Times, Gurpreet Narwan and Callum Jones) highlights another fast fashion player that suffered from investor ire after revelations of links to grossly underpaid workers at (at least) one of their suppliers and Crisis leaves fast-fashion’s image in rags (Daily Telegraph, Laura Onita) discusses the effect these revelations are having on the whole fast-fashion industry. * SO WHAT? * The existence of sweatshops in places like Leicester has been known about for years but no-one has really done anything about it. A study conducted by the University of Leicester in 2015 concluded that “The majority of workers in Leicester’s garment sector earn around £3 an hour, receive wages cash in hand and do not hold an employment contract”. Interestingly for Boohoo, almost 50% of its product is made in the UK and has it enjoyed an advantage over competitors including Asos because this means it can pivot very quickly to new trends (under coronavirus, this means it was able to make a swift switch from “smart” to loungewear). For others that do not have this ability, mountains of unsold stock can accumulate as a result – which they then probably have to sell for a discount. I imagine that we are only seeing the tip of the iceberg at the moment and if there is, eventually, a crackdown on working practices fast-fashion companies will either have to accept a narrower margin and/or pass the increased prices on to customers.



Analog buys Maxim for over $20bn, Google plans a chunky investment in India and SoftBank considers deal-making…

In a swift look around tech news today, Analog buys Maxim for over $20bn (Financial Times, Ortenca Aliaj and Eric Platt) highlights the largest US acquisition so far this year as the former announced its intentions to buy the latter in an all-stock (i.e. no cash is involved) deal to create a bigger rival to compete with Texas Instruments. Both companies make analogue chips which convert real world signals into electric ones. I mentioned this because this is a sizeable deal!

Then in Google joins rush into India with $10bn investment plan (Daily Telegraph, Hannah Boland) we see that Google is planning on investing a large slug of money into the country over the next five to seven years in order to gain a better foothold in what some see as the market with the biggest digital potential in the world. The $10bn will be allocated via an India Digitisation Fund into various investments in the country. It intends to help more Indians get affordable access to the internet and to develop new

products and services specifically for the Indian market. * SO WHAT? * What a contrast to what is going on with Chinese companies at the moment! Everyone is trying to jockey for position in a market where hundreds of millions still don’t own a smartphone, but given that CEO Sundar Pichai was born and educated in India you would have thought this would help relations with the country and give Google an edge over others!

Talking about investment, SoftBank ready to do deals as shares soar to 20-year high (Financial Times, Arash Massoudi and Kana Inagaki) shows that the company, whose share price is sitting at a 20-year high, is ready to do some more deals. It is sitting on a ton of cash and is now thinking of going shopping. It is also considering options for its chipmaking business Arm, including a sale, partial sale and/or an IPO. * SO WHAT? * When you look at SoftBank’s performance, you always have to consider how much of it is due to its stake in Alibaba (it bought in at a VERY early stage and has been reaping the rewards ever since, selling off bits here and there). It is also, however, benefiting from stakes it has taken in a load of tech stocks that it has in its $100bn Vision Fund although it has had a few mis-steps in the form of investments in Wirecard and WeWork (although the latter seems to be turning around). Exciting times ahead!



PepsiCo benefits from snacks, Universal launches Peacock and G4S announces cuts…

In other news today, At PepsiCo, quarantine snacks offset drop in soda sales (Wall Street Journal, Jennifer Maloney) shows that strong sales in snacks and packaged goods have generally mitigated a fall in sales of beverages. The company expects this situation to reverse when more people start returning to work and going to bars and restaurants, which is where they sell the drinks!

Peacock, NBCUniversal’s new streaming service, joins crowded field at challenging time (Wall Street Journal, Lillian Rizzo and Joe Flint) heralds yesterday’s launch of the latest streaming service, which is hoping to tempt new users with its cheap price (which comes with a bit of advertising). It is positioning itself as the cheap-and-cheerful alternative to all the others out there but has been dealt with a number blows as its centrepiece was to be the

Tokyo summer Olympics (which obviously got cancelled) and the proprietary content has been delayed because of lockdown difficulties. Peacock Premium costs $5 a month with ads or $10 without versus HBO Max at $14.99, Disney+ for $6.99 and Apple for $4.99 a month. Netflix is still way ahead of everyone, though! * SO WHAT? * It’s great to see more content available for consumers. I wonder whether there will be churn between the services when people fancy a bit of a change but I would imagine that, a few years down the line, there’s bound to be consolidation between all the different channels – and we’ll all end up back where we started because there are surely only a certain number of subscriptions one can have! Anyway, for now, here’s yet another competitor!

There’s sobering news in G4S to cut more than 1,000 jobs in cash arm (The Times, Robert Lea) as the outsourcing company said that it is reducing the size of its cash collection and delivery business as the trend for decreasing cash usage continues. G4S is the world’s biggest security company, employs over 500,000 people and was created in 2004 by the merger of Securicor and Group 4 Falck. * SO WHAT? * This is just another example of coronavirus’ role in accelerating an ongoing trend.



…in other news…

I thought I’d leave you today with a fantastic sounding theme park in Japanese nature theme park lets you zoom through the air at over 40 miles an hour (SoraNews24, Shannon) and the rather excellent Coronavirus: Care home residents recreate record covers (BBC). Brilliant!

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Some of today’s market, commodity & currency moves (as at 0750hrs 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 **
6,176 (+1.33%)26,200 (+0.44%)3,176 (+0.66%)10,39112,800 (+1.32%)5,056 (+1.73%)22,587 (-0.87%)3,415 (-0.83%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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