Tuesday 23/06/20

1. In MACROECONOMIC NEWS, the ECB/German court kerfuffle nears an end, BoJo presses on with lockdown easing, the Bank of England cautions and Japan pushes for a UK trade deal
2. In TECH-RELATED NEWS, Apple announces big changes and digital ads are about to overtake trad ad market share
3. In INDIVIDUAL COMPANY NEWS, Refinitiv is about to get the Brussels treatment and Wirecard’s problems get even worse while warehouses boom
4. AND FINALLY, I bring you Japanese zombies attacking your car and a mullet-free zone…

So the Berlin vs ECB thing looks like dying down, Johnson prepares for lockdown lifting, the Bank of England makes a sobering statement and Japan pushes for a trade agreement…

Further to the whole drama going on between Germany’s constitutional court and the ECB over its massive bond-buying programme, Berlin and ECB signal end to legal impasse over bond-buying (Financial Times, Martin Arnold) shows that the stand-off may be easing as Germany’s finance minister, Olaf Scholz, says that there will be a resolution “without drama” – potentially this week. In addition to this, a newly-appointed German constitutional court judge, Astrid Wallrabenstein, said over the weekend that she hoped “things will ultimately develop in the right direction and that in the end everyone will get over certain injuries”. * SO WHAT? * It seems that both sides are coming together now, but I think that the ECB got a big shock from the Germans. There was the potential for this to throw a massive spanner in the works for the ECB’s stimulus efforts and a resolution had to be sought in double-quick time to avoid serious problems. It’s not over yet, but it certainly seems like it’s going that way. 

Meanwhile, Johnson to overrule scientists and ease lockdown (Financial Times, George Parker, Jim Pickard, Laura Hughes and Sebastian Payne) shows that the PM will go ahead and reduce the 2m social-distancing rule meaning that cinemas, galleries, museums, pubs, restaurants, hotels and hairdressers will be allowed to reopen on July 4th. It also seems likely that the government will lift 14-day quarantine restrictions on travellers arriving from countries such as Belgium, France, Germany, Greece and Spain sometime in the next few days. There will also be new legislation introduced into Parliament this week that will allow cafés and pubs easier access to tables on pavements. A mooted relaxation of Sunday trading laws has been dropped, however, following objections from Conservative MPs. * SO WHAT? * There are going to be loads of naysayers out there. It seems to me that if 2m was the correct distance, we are being lied to now, but if 1m was the correct distance all along then we’ve been lied to for the last three months! Having said that,

there is obviously an uncomfortable balance that needs to be struck by the government that HAS to balance economic well-being and increased risks of coronavirus infection. I think it’s a bit like going to your GP after a sporting injury. You will probably be advised to stay in bed and not do anything because this is the risk-free way of sorting yourself out. If, however, you cannot/don’t want to do this for whatever reason, you go to another (sportier) GP who will give you ways of rehabilitation and perhaps recommend you to a physiotherapist. There is more risk of aggravating the injury in this case, but you are willing to take the risk in order to get back to your sporting endeavours. In the case of coronavirus, I suspect that the scientists may well be right to be more cautious – but if there is yet another need building and building every day to open up businesses and get the economy moving again, something has to give. In this case, it’s the 2m rule. I personally think that it will also be interesting to see whether there is a spike in coronavirus cases this week or next as it is now a couple weeks since we had many of the Black Lives Matter protests which involved large gatherings of people. If there is no appreciable spike, then I would have thought that people will become increasingly confident of venturing out.

Markets on notice as Bailey warns Bank’s QE blitz can’t last (Daily Telegraph, Tom Rees) highlights the Bank of England governor as saying that it will reverse its quantitative easing programme before raising interest rates when the economy starts to recover from the coronavirus outbreak. Andrew Bailey said that the Bank needs to build up reserves as soon as it can to ensure that it can prepare itself for another potential downturn and that markets should not expect QE as the norm. So far this is all talk, but quantitative tightening (QT) has had mixed success when introduced elsewhere. Like many things at the moment, we’ll just have to wait and see what happens.

Following on from recent news of trade talks with Australia, Japan rushes UK to agree first post-Brexit trade deal (Financial Times, Robin Harding and Sebastian Payne) shows that Japan has only given the UK six weeks within which to put a post-Brexit trade deal together. * SO WHAT? * Although the speed with which this deal may be put together will give BoJo something to boast about going into Brexit, there is a risk that more sacrifices may have to be made as these things usually take years. It’ll be interesting to see what comes out of this.

Apple announce big changes and digital advertising continues to flourish…

Apple tightens control with launch of its own chips (Daily Telegraph, James Titcomb and Olivia Rudgard) announced yesterday that it would start making its own microchips for its Mac computers, marking the end of a 15-year relationship with Intel. It will start selling computers with proprietary chips later this year that will be made by Apple but designed by Cambridge-based-but-SoftBank-owned Arm and will bring the computers closer to other devices whose designs are already utilised in the company’s iPhones and iPads. The idea of all of this is to improve performance (because they will be specifically designed), cut loading times and give them more processing power. They are also likely to cost less, which will help margins. If you want to know more detail about the differences you’ll see with Apple chips, you should have a read of Apple’s new Macs: how they’ll work after ditching intel chips (Wall Street Journal, Nicole Nguyen). iOS 14, iPadOS, Watch OS 7, MacOS Big Sur: the changes coming to your Apple devices (Wall Street Journal, Joanna Stern) takes a look at what changes are heading our way in the next version of Apple’s iOS. AirPod Pros will get better sound, your Watch

will be able to know when you are washing your hands and make you do the full 20seconds (!) and laptops will get better battery life, among other things. iOS 14 will be available to all iPhones that go back to the iPhone 6s. * SO WHAT? * All of these things sound like decent improvements and will probably keep current Apple users happy. However, what I want to know is – WHEN IS THEIR 5G PHONE COMING OUT?!? It was supposed to be September/October time, but coronavirus delays will been the launch could be postponed. At least a delay will give me more time to think about which internal organ I will have to sell in order to raise the money to buy one 😂

Digital ad market set to eclipse traditional media for first time (Financial Times, Alex Barker) heralds a historic (yet inevitable?) moment for digital advertising as media buying agency GroupM (which is itself owned by advertising giant WPP) says that digital marketing is likely to account for over half of the $530bn global advertising industry in 2020. Recent forecasts by other companies, such as Magna, also expect this to be the case. The momentum had been gathering pace before the pandemic, but coronavirus has just accelerated the process. * SO WHAT? * Advertising spend is one of the first things to get cut when companies want to slash costs in an economic downturn. Digital advertising tends to be more targeted and more about purchases whereas traditional advertising tends to be more about enhancing the brands. This is going to be pretty disastrous for TV advertising revenues.

Refitinitiv is going to get the Brussels treatment, Wirecard’s woes get worse and warehouses are hot property…

Given the current climate I’d say Brussels refers LSE-Refinitiv deal for full antitrust investigation (Financial Times, Philip Stafford and Javier Espinoza) is somewhat unsurprising! LSE’s planned $27bn takeover of Refinitiv will face close scrutiny as regulators are concerned that the enlarged company could prioritise customers for critical data used on global markets, that there could be an overlap on European sovereign bond-trading and that there could be a potential concentration of derivatives trading. A final ruling will be expected by October 27th but could be extended if authorities force the parties to make concessions to satisfy any concerns.

Elsewhere, Wirecard fights for survival as it admits scale of fraud (Financial Times, Olaf Storbeck, Dan McCrum and Stefania Palma) shows that things are going from bad to

worse for the German payments processor following recent revelations as it said that the €1.9bn of cash on the balance sheet may not have existed at all! The company’s share price is now down by 80% since the scandal erupted last Thursday. Wirecard fall puts British fintech unit in jeopardy (The Times, James Hurley and Ben Martin) shows that the repercussions in Germany are likely to spread as its British subsidiary, which currently holds hundreds of millions of pounds of customers’ money, looks suddenly vulnerable. Presumably, there is going to be a stampede of customers trying to get their money out.

On a more positive note, Sale of warehouses to break records for booming sector (The Times, Louisa Clarence-Smith) shows that the biggest warehouse investment sales is about to start as Prologis is about to sell a portfolio of properties with a guide price of over £435m. Prologis is the world’s biggest owner of warehouses and distribution centres and is selling this portfolio because standalone warehouses no longer align with their overall strategy. * SO WHAT? * This will be the largest portfolio of warehouses ever put up for sale in Britain and, given the boom in online shopping during lockdown, demand is likely to be very high. What a contrast with the fortunes of retail property owners!

…in other news…

We are all fantasising about what we will do when we escape lockdown. We all want to have fun experiences again – and for some people that includes getting chased by zombies! Rather handily, there is an option available for Japanese who like a bit of a fright in Coronavirus leads to the creation of haunted drive-in in Tokyo this summer (SoraNews24, Casey Baseel https://tinyurl.com/y7k8xolg). Then there was the sad story of a lad who just wanted to celebrate a milestone birthday and was rejected because of his haircut in Man claims he was refused entry to pub on 18th birthday – because of his hairstyle (The Mirror, Courtney Pochin https://tinyurl.com/ycew3exl). Clearly the pub was mullet-ist…