Tuesday 18/06/24

  1. In BIG PICTURE NEWS, Chinese house prices continue to weaken and its industrial output looks shaky, London overtakes Paris as investors take fright and businesses try to keep their options open, investment in the UK lags other G7 members and wind looks set to overtake gas
  2. In IPO-RELATED NEWS, Shein looks at new revenue streams ahead of its proposed London listing and ad agency Havas prepares for its IPO
  3. In MISCELLANEOUS NEWS, Apple ditches its BNPL service, Europe sparks investment in defence, BYD aims for Europe and the FT reckons that there’s enough slack in state schools to absorb an influx
  4. AND FINALLY, I bring you the fruits of media training…

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BIG PICTURE NEWS

So China’s wobbles continue, London overtakes Paris, investment in the UK falls behind and wind is set to overtake gas…

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In news on China’s economy, Chinese house prices fall at fastest pace in a decade (Daily Telegraph, Melissa Lawford) cites the latest data from the National Bureau of Statistics which shows that Chinese property prices fell at their fastest rate in May in their biggest monthly drop since October 2014! This was the eleventh consecutive month of falling property prices in China despite various stimulus efforts from the government. * SO WHAT? * This just goes to show there’s a LOT more to be done by China’s government to tame the massively-indebted real estate sector and consequent scepticism surrounding it. This would suggest that the sector will continue to be a drag on the wider China economy.

As if that wasn’t enough, China’s recovery on shaky ground as output disappoints (The Times, Jessica Newman) cites more data from the National Bureau of Statistics which shows that industrial output grew by less than expected in May. On the plus side, exports (particularly those of steel and aluminium) were pretty good as were retail sales. * SO WHAT? * It certainly looks like China’s economy is a bit of a mixed bag currently. Solving the problems of the real estate sector will be key to getting the world’s second biggest economy back on track as there are positives in there.

Then in Paris loses spot as Europe’s largest equity market to London (The Guardian, Jasper Jolly and Graeme Wearden) we see that the value of Euronext Paris stocks dropped by $258bn in the week following Macron’s shock election announcement. Investors flee Paris for London amid fears of political upheaval (The Times, Tom Howard) highlighted France’s biggest banks (Société Générale, BNP Paribas and Crédit Agricole) as being among the worst affected by the investor exodus as they are major holders of government bonds. There seems to be a worry that a Rassemblement National (RN) victory in the election would lead to a “Liz Truss-style financial crisis”. French businesses court Marine Le Pen after taking fright at left’s policies (Financial Times, Leila Abboud, Adrienne Klasa and Sarah White) shows that corporate France is trying to hedge its bets by trying to build bridges with Le Pen because company leaders think they might make more headway with RN in terms of shaping policy rather than the left-wingers who are thought to be unlikely to budge their anti-capitalist stance. * SO WHAT? * I don’t think that there’s anything here for the LSE to celebrate because this is all about the Paris market doing badly rather than the London market knocking it out of the park. This really does highlight the desperate situation that the French find themselves in. The drama continues…

Meanwhile, Investment in UK has trailed other G7 countries since mid-1990s, IPPR says (The Guardian, Phillip Inman) shows that investment in the UK has fallen behind other G7 countries for 24 of the last 30 years, according to the latest research from the IPPR think tank. The lack of spending by UK companies on tech and innovation over this time was thought to be the main culprit for this state of affairs. It is also rather depressing to conclude that public sector investment has also trended below the G7 average. It looks like the next government has its work cut out to address this!

In energy news, Wind to overtake gas as UK’s main electricity source for the first time (Daily Telegraph) cites research from Offshore Energies UK which shows that wind actually outperformed gas over Q1 and it looks likely that this will continue for the rest of the year! In 2023, wind generated 82 terawatt hours (TWh) of power versus 96TWh from gas and 37TWh from nuclear sources. This has been helped by a number of major wind farms coming online over the last few months, including Dogger Bank in the North Sea, which is the world’s biggest!

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!

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IPO-RELATED NEWS

Shein looks at new revenue streams and Havas gets ready for flotation…

Shein chases new revenue streams as it prepares for London listing (Financial Times, Eleanor Olcott) shows that the rapidly growing Chinese fast fashion behemoth is investing in logistics infrastructure and trying to diversify into areas such as furniture, electronics and petcare via third party vendors selling on the marketplace it set up last year. Recent market research shows that use of the app has reached a plateau globally so it makes sense to diversify. Still, Shein’s fast fashion looks crazily out of step with Starmer’s Britain (Daily Telegraph, Ben Marlow) suggests that if Labour wins the election and wants to show that it’s serious about championing workers’ rights, it needs to reject a London IPO for the company. * SO WHAT? * London is not Shein’s

first choice of listing venue – it’s only here because it got rejected by New York. If people really take seriously Shein’s alleged human rights record, its somewhat lax attitude to the environment and its alleged propensity to flout copyright it really should not list here. However, there will be plenty of investment bankers and politicians who would say otherwise… 

Over in France, Ad agency Havas prepares €400mn investment plan ahead of IPO (Financial Times, Daniel Thomas) highlights plans for the French advertising agency to invest in AI and data-led initiatives over the next four years as it makes arrangements to split from its parent company Vivendi. Havas is due to list sometime next year, so I guess that it won’t be too bothered about rocky market sentiment going on at the moment from Macron’s decision to call an unscheduled election.

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!

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MISCELLANEOUS NEWS

Apple ditches its BNPL service, Europe invests in defence start-ups, BYD aims for Europe and the FT reckons state schools could cope with an influx…

In a quick scoot around some of today’s other interesting stories, Apple scraps ‘buy now, pay later’ service in US just months after rollout (Financial Times, Michael Acton and Joshua Franklin) shows that the mighty Apple has decided to bin Apple Pay Later, a BNPL service it launched in the US last year. The company said that it was working on a new instalment loan service that would be offered via third party credit and debit cards. In the UK this will be available via HSBC and Monzo banks. * SO WHAT? * This is an interesting one because Apple rolled this out to great fanfare and it was seen to be a pretty punchy move taking on established players like Klarna and Affirm. Gradually, though, the agreements and partnerships that this all started out with have mostly run their course and it seems that Apple is now looking to provide the same or similar services – just with less risk!

In Europe spurs investment in defence tech start-ups (Financial Times, Tim Bradshaw and Sylvia Pfeifer) we see that the head of NATO’s €1bn venture capital fund, the NATO Innovation Fund, said that investment in defence tech start-ups is gathering pace in Europe. Interestingly, NATO’s fund invests with a 15 year time horizon which is a long time compared to “normal” VCs who generally aim to return their funds within 10 years. Wales-based Space Forge (produces novel materials in space), Germany’s ARX Robotics (developer of dual-use autonomous ground systems for surveillance and transportation), London-based Fractile AI (makes AI systems run more efficiently) and Uni of Bristol spinout iCOMAT (develops lighter and stronger materials for aerospace and automotive vehicles) are among those backed by the fund. Germany, the UK, Italy, Spain and Turkey are just some of the 24 countries who contribute to the NATO Innovation Fund. It sounds like this fund is very much needed at the moment!

Meanwhile, BYD: China’s electric vehicle powerhouse charges into Europe (The Guardian, Jasper Jolly) shows that BYD’s coming for Europe now that we know more about the tariff thing! Fun fact: BYD is the only carmaker to sponsor Euro 2024 and Auto Trader said that its advertising led to a 69% week-on-week rise in views of BYD models on its website over the initial weekend of the tournament. Also, it is thought that it faces lower tariff rates than some rivals because of its co-operation with the EU and because it benefited less from state subsidies than rivals. European makers should be very worried!

I thought I’d finish on State schools have enough space for exodus of private pupils (Financial Times, Laura Hughes and Amy Borrett) because the sudden imposition of VAT on private school fees that Labour says it will enact  if it wins the election has caused an almighty kerfuffle. The obvious conclusion most people would draw from this is that state schools will be flooded with ex-private school kids, bumping up already high classroom sizes. Not so, according to FT research, which shows that 85% of local authorities have more unfilled places in primary and secondary schools than privately-educated students. * SO WHAT? * I think that this will vary wildly across the country. Also, you would have thought that the schools with the excess capacity are the ones that parents don’t want their kids to go to – and there are usually good reasons for that. If all schools were of roughly the same standard this would all be great – but the fact of the matter is that they are not. I think that the policy of slapping VAT SUDDENLY on private schools is extremely unfair and punishes those parents who struggle to put their kids through it and ironically benefits the richer parents and kids who can afford to just pay up in advance (probably for a discount – which benefits them even more!). For the record, both my kids go to the local state school. I think that if they wanted to put VAT on school fees, they should put it up in a staggered way to give people more of a chance of paying rather than bringing it in suddenly.

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!

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...AND FINALLY...

…in other news…

You probably know this already, but one of the reasons why politicians generally don’t appear to answer questions directly when they are on TV is because they get media training! So here is what that looks like in a corporate context 🤣!

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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