Tuesday 14/12/21

  1. In MACRO, MARKETS & VACCINE NEWS, the Fed sees more inflation, Turkey’s lira tumbles further, BoJo feels a business backlash, but Amazon rides to the rescue with PCR tests and foreign investors pour money into Chinese stocks
  2. In ENERGY-RELATED NEWS, gas prices rise and benefit Gazprom, Volvo Cars and Northvolt pursue a major battery venture and a giant battery storage site is planned for Teeside
  3. In AVIATION NEWS, air freight prices boom, Virgin Atlantic gets an injection and United Airlines looks into hydrogen engines
  4. In INDIVIDUAL COMPANY NEWS, Adobe takes on Canva, Frasers Group launches a buy back and Screwfix plans a major expansion
  5. AND FINALLY, I bring you the weirdest soup-based dish you’ll probably ever see…

1

MACRO, MARKETS & VACCINE NEWS

So inflation continues to rise, BoJo hits major resistance, the High Street empties, Amazon looks like becoming a PCR hero and Chinese shares get a foreign investor boost…

Fed to pivot to swift action on inflation in face of rising prices (Financial Times, Colby Smith) shows that Jay Powell is now under even more pressure to take action on inflation as the latest official figure showed a 6.8% rise in November – its steepest annual rise in almost 40 years. America’s central bank had already hastened the pace of its scaling back of monetary policy and Powell reiterated his commitment to do what he could to make sure higher inflation did not become entrenched. The Fed begins a two-day meeting where it will discuss what to do with the interest rate today.

In Europe, Lira plummets amid fears of further rate cuts in Turkey (Daily Telegraph, Russell Lynch) goes to the more extreme end of the scale regarding inflation as investors are worried that president Erdogan is going to make things even worse for Turkey by potentially cutting rates to curb inflation (everyone else in the world takes the opposite action to take the edge off) that is currently running above 21%! So far, he has forced the central bank to cut interest rates by 4% since September and economists are now expecting another cut to 14% this week. * SO WHAT? * The lira has almost halved in value versus the dollar this year and is the worst-performing currency among emerging markets. What IS going through Erdogan’s mind?? The thing is, there isn’t really anyone who can stop him doing what he wants. He’s already been through three central bank governors before the current one since he began his second term in office in 2018. Will he ultimately be proved to be a lone genius in a world that INCREASES interest rates to curb inflation or the world’s biggest idiot for sticking to his theory? Time will be the judge…

Meanwhile, back home, Boris Johnson confronted by business backlash over new Covid rules (Financial Times, George Parker, Daniel Thomas, Jasmine Cameron-Chileshe and Sebastian Payne) shows that the PM is under even more pressure now regarding actions pertaining to

Plan B and the damage that it is expected to do at a crucial time of the year. Following new measures encouraging working from home, traffic at City of London Underground stations fell by 30%, Wetherspoon warns of ‘lockdown by stealth’ (Daily Telegraph, Laura Onita) highlights concern by the boss of JD Wetherspoon who reckons his pub chain’s profits could be wiped out by the latest restrictions and Footfall dips on high street as work from home order takes effect (Daily Telegraph, Laura Onita and Howard Mustoe) cites the latest data from Springboard which shows that  shopper numbers have fallen at a time when they are supposed to be building up. They were down by 18% versus 2019 levels but up by 18% versus last year when Covid case numbers were increasing. * SO WHAT? * This is an absolute nightmare for all concerned as I really think that businesses that had suffered so much under lockdown had put so much store on a bumper Christmas. The ONLY thing I think that COULD come out of this is that MAYBE the traditionally quieter months at the beginning of the year won’t be as quiet as they normally are because gatherings may have been postponed rather than outright cancelled. I think this could be a pipe dream, however, as I think that Christmas itself provides more of an impetus to spend.

Elsewhere, Amazon to sell low-cost PCR Covid tests for UK travellers (The Guardian, Zoe Wood) highlights something that could prove to be hugely popular as the e-tailing giant is going to start selling cheap PCR test kits to travellers, which have been government-approved. The tests will be processed at Amazon’s lab in Salford, which was originally set up last year to process tests for employees. * SO WHAT? * Amazon’s move will no doubt be welcomed by travellers who have complained about the current set-up. An interesting development, no?

Also, it was interesting to see Foreign cash bolsters Chinese shares (Daily Telegraph, Julia Bradshaw) because it seems that, despite authorities’ recent meddling in tech and real estate (among other things), a stronger yuan and the current “zero Covid” policy, foreign investment in Chinese shares has reached new highs. Foreign cash has poured into Chinese stocks as investors are betting that the government is going to unleash a stimulus package very soon. Such a package may include increased spending on infrastructure and perhaps a lighter-touch approach to regulation of industries that need help.

2

ENERGY-RELATED NEWS

Gas prices rise, Volvo and Northvolt enter a battery venture and Teeside is about to become home to a major battery storage site…

In Gas prices near record highs as Berlin rejects pipeline from Russia (The Guardian, Jillian Ambrose) we see that gas prices in the UK and Europe are set to hit record highs once more as Germany is refusing to approve the Nord Stream 2 pipeline because it did not meet the requirements of EU energy law (but we all know what this is really all about – dragging feet on Nord Stream 2 approval as a way to discourage Russia from invading Ukraine!). Gas prices climbed by about 10% yesterday in Europe. Funnily enough, Gazprom profits as country prospers from Europe’s gas crisis (The Guardian, Jillian Ambrose) shows that the world’s biggest gas producer posted a record net income figure for the July to September quarter (versus a net loss a year ago) with many expecting an even more impressive performance for Q4. It certainly pays to be a gas producer in a global gas crisis!

Then in Volvo Cars and Northvolt seek to take $3bn battery venture to US and Asia (Financial Times, Richard Milne) we see that both companies are planning on taking their battery partnership further afield to the US and Asia to get ahead of car manufacturers doing their own thing in batteries. They are about to open Europe’s first “gigafactory” in Sweden this month, with another one in Europe (the location of which is to be announced at the beginning of next year) slated to start production by 2026. * SO WHAT? * Northvolt had originally aimed to keep within Europe, but given that partner Volvo also has operations in the US and China, it made sense to look further afield.

Moving on to batteries of a different kind, Giant battery storage site planned (Daily Telegraph, Rachel Millard) highlights an attempt by the UK to attract investment by Singapore-based Sembcorp Industries to build what would be Europe’s biggest battery storage system in Teeside. It would be a facility that could store 360MW of energy, enough energy to power over 330,000 homes and could be a real boon in the effort to harness renewable power to reduce the volatility of supply. * SO WHAT? * Power storage is increasingly important as we generate more power from renewable sources these days but have been unable to hang on to it for long. This has resulted in volatile supply and, ultimately, the gas shortages that we are all feeling the effects of at the moment. This would certainly be a major step forward in smoothing supply capability! 

3

AVIATION NEWS

Air freight prices rise, Virgin gets more money and United invests in hydrogen engines…

In a quick scoot around some of today’s aviation-related stories, Air freight costs soar to record high (Financial Times, Philip Georgiadis) cites data from the Baltic Exchange Airfreight Index and TAC Freight which shows that the cost of flying freight around the world has reached record levels as demand intensifies in the run-up to Christmas. Some routes between China, the US and Europe have seen prices almost double over the last three months which has resulted in a shortage of capacity. * SO WHAT? * This is hardly surprising! Given the mad rush that everyone has been in to keep shelves stocked etc. going into Christmas, companies have been increasingly turning to more expensive air freight as shipping capacity continues to get clogged up. It’ll be interesting to see whether this calms down after Christmas or whether the backlog will continue well into 2022.

In other aviation-related news, Virgin Atlantic gets £400m injection as airlines battle Omicron gloom (The Guardian, Gwyn Topham) shows that the owners of Virgin Atlantic, Sir Richard Branson and Delta, have decided to put another £400m into the ailing carrier to cover it through the Omicron spread and related travel restrictions. It was only a month ago that it trumpeted its return to transatlantic flight – oh how things can change!

Then in United Airlines invests in hydrogen engine pioneer (Daily Telegraph, Howard Mustoe) we see that both Alaska Airlines and United Airlines have put money into a funding round for ZeroAvia, a pioneer of aviation-use fuel cells. United has also agreed to buy up to 100 of the engines. The technology itself is designed to replace traditional jets and the first engines are due to be installed in 10-20 seat planes by 2024. * SO WHAT? * This sounds like a great development for zero-emission flight, no? Obviously this is for smaller planes at the moment and it remains to be seen whether this will be an option for larger ones. Still, it looks like a step in the right direction!

4

INDIVIDUAL COMPANY NEWS

Adobe takes on Canva, Frasers launches a buy back and Screwfix plans an expansion…

Elsewhere, Adobe takes on Canva with freemium offering (Financial Times, Richard Waters) shows us that Adobe unveiled a comprehensive design software package for non-professionals yesterday that will put it in direct competition with Canva. It includes versions of Photoshop, Illustrator and Premiere which has real similarities in look to Canva! * SO WHAT? * Canva has been hugely successful with the mushrooming of amateur content creation (Canva’s now got an implied valuation of around $40bn following its most recent funding round) and clearly Adobe wants a piece of the action. It’s either a defensive move to stop Canva barging into the more “professional” space or an aggressive move to steal some of Canva’s thunder – or it could be a bit of both. A free version is available or there is a paid version at $9.99 per month…

In the UK, Ashley launches £70m buyback at Frasers Group after profit rise (Daily Telegraph) shows that things really have turned around at the retailer as it is now confident enough to engage in a share buy back that will run until April 24th. I’d say that this will provide the stock with a reasonable floor although this is a bold move to make right now given Omicron-related uncertainty. Then in Screwfix quick off the blocks with expansion in DIY boom (The Times, Ashley Armstrong) we see that Screwfix is going to open another 350 shops due to the success of its speedy delivery service and ongoing demand for DIY materials and equipment! The DIY boom continues!

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with the rather bizarre New Japanese hotpot restaurant directs you to melt an adorable bear like a movie villain (SoraNews24, Katy Kelly) as it is, well, very bizarre and yet quite clever. You do wonder who thought this would be a good idea. I think this would potentially leave kids traumatised…

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Some of today’s market, commodity & currency moves (as at 0754hrs 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 **
7,231 (-0.83%)35,650.95 (-0.89%)4,668.97 (-0.91%)15,413.28 (-1.39%)15,622 (-0.01%)6,943 (-0.70%)28,417 (-0.78%)3,662 (-0.53%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$71.50$74.66$1,784.941.320671.12741113.711.171447,049

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