Tuesday 24/08/21

  1. In MARKETS & MACRO NEWS, equity and commodity markets strengthen but the UK recovery slows as manufacturing is hit by supply chain disruption
  2. In POST-CORONATRENDS NEWS, City airport is returning to growth, the West End is moving in the right direction, UK banks experiment with sharing and Lixil makes digital showrooms a permanent feature
  3. In GIG COMPANY NEWS, Uber and Lyft rise above, Boots announces a trial with Deliveroo and Didi abruptly stops its UK expansion
  4. In INDIVIDUAL COMPANY NEWS, Pfizer makes a biotech acquisition, Sainsbury’s gets a bid rumour boost, Xiaomi leapfrogs Apple and electric cars get a spontaneous combustion-related wobble
  5. AND FINALLY, I bring you an amazing home-made games console and a tragic sandwich…

1

MARKETS & MACRO NEWS

So markets and commodity prices rebound and the UK’s economic recovery slows thanks to supply chain issues…

Global equity and commodity markets kick off week on strong note (Financial Times, Siddharth Venkataramakrishnan and Shubham Saharan) highlights Wall Street hitting new highs and commodity prices staging a rally in a strong start to the week yesterday. American, European and Asian stock markets were all higher and commodity prices, including oil, had a bit of a rebound after losing ground going into the end of last week. Demand for metals remained strong and inventories in China have been falling quickly while the US dollar weakened, which also made commodity prices more attractive (because most of them are priced in dollars).

Meanwhile, UK’s Covid recovery slows amid staff and materials shortage (The Guardian, Richard Partington) cites the latest findings from the IHS Markit and CIPS which show that growth in private sector output hit a six month low this month and Factories hit by worst ever supply chain disruption (Daily Telegraph, Louis Ashworth and Tim Wallace) cites the latest CBI industrial trends survey which shows that factories are experiencing their worst ever stock shortages due to a killer combination of supply chain problems, skyrocketing shipping costs, Brexit red tape and ongoing pandemic concerns. * SO WHAT? * Although there seems to be an overall willingness to spend, supply chain problems caused by chip shortages, Suez canal blockages, shipping costs, the lack of lorry drivers, rising raw materials prices and a backlog of work caused by the pandemic all seem to be piling up. I still think that we are generally going in the right direction but it’s undoubtedly frustrating for all those businesses who just can’t take advantage due to circumstances beyond their control. The consumer seems to be willing to pick up the tab as things stand currently but that won’t last forever.

2

POST-CORONATRENDS NEWS

There are signs of recovery at City airport and the West End as UK banks and Lixil try new things…

As the UK drags itself out of the pandemic hole, London’s City airport points to business travel ‘slowly’ returning to growth in 2022 (Financial Times, Sarah Provan) shows that the business travel hub is getting more optimistic, according to its chief commercial officer, Richard Hill. He said that corporate customers in Canary Wharf are talking about a phased return and London’s West End is recovering from Covid crisis, says Shaftsbury (The Guardian, Joanna Partridge) cites the central London landlord Shaftsbury as saying that Londoners and domestic tourist numbers are increasing. * SO WHAT? * Clearly there is room for improvement here as talk is all very well about business travel – but it has to materialise! Mind you, if M&A momentum continues and other business-related behaviours (like going to conferences, for instance) and leisure travel return to somewhere near pre-Covid levels, there is a fighting chance for businesses to recover. There’s still the problem of staffing to contend with, but at least the underlying demand is there for the moment at least.

Meanwhile, Could banks find that sharing is caring? (Financial Times, Claer Barrett) is an interesting discussion about UK banks experimenting with having joint branches as a way to address the need for having a physical presence whilst simultaneously streamlining their branch numbers. NatWest, Lloyds, Barclays, HSBC, Santander and

the Post Office operate from two hubs at the moment – one in Rochford, Essex, and the other in Cambuslang near Glasgow – and their experiment, which started in April, has just been given the go-ahead to extend its deadline from the original October this year to “at least” April 2023. * SO WHAT? * I think that, although this is on a very small scale and does sound somewhat counter-intuitive, it is a decent immediate solution to a growing problem as banks try to cut costs whilst still providing convenience for their customers. I would not be surprised to see this kind of arrangement grow.

Then in Toilet maker Lixil plots post-Covid shift to digital showrooms (Financial Times, Kana Inagaki) we see that Lixil, which is one of the world’s biggest toilet and housing groups, is moving to digital showrooms as the pandemic-prompted move becomes more of a permanent fixture. Physical showrooms were shut down last year, meaning that customers were forced to do more things digitally and it seems that customers have become increasingly accustomed to using Zoom, 3D images, augmented reality and other technologies to test out kitchen and toilet designs. * SO WHAT? * I think that this is really interesting and given that employees say that the whole digital thing compresses the time it takes to get contracts signed, it sounds like a viable course of action not only for toilets and kitchens but also other things as well. I would have thought that, for instance, it would be useful in furniture and DIY stores for starters, but perhaps it could be used even more in garden design and construction. I think that if people can be reassured that the expensive things they are buying actually fit their abodes (and look good), they are much more likely to go through with the purchase!

3

GIG COMPANY NEWS

Uber and Lyft strengthen, Boots trials Deliveroo and Didi stops its expansion…

Uber and Lyft shares rise despite legal setback on ‘gig workers’ (Financial Times, Dave Lee) highlights that the share price of both ride-hailers jumped in trading yesterday as the latest legal development tipped in their favour on the whole “are-they-workers-or-are-they-independent-contractors” thing that seems to be dragging on forever. Whenever they reach a final un-appealable conclusion, this will have implications not just on gig company operations in America, but it will provide a precedent for how things are done on a global basis.

In other gig-company developments, Boots launches on-demand delivery trial with Deliveroo (The Guardian, Jasper Jolly) shows that Boots is about to make its products available via Deliveroo in 14 stores across London,

Birmingham, Edinburgh and Nottingham (and other places) in a trial being launched today. Customers will be able to order medicines, painkillers, toiletries, makeup, baby products and snacks. * SO WHAT? * I suspect this will be a great boon for parents and those who are too ill to venture out (not to mention the bone idle 😁!) and feeds into the growing on-demand grocery market. It is also good for Deliveroo as a way to diversify its exposure away from reliance on takeaway delivery.

Then in Chinese Uber rival Didi scraps British launch amid privacy fears (Daily Telegraph, James Titcomb) we see that the currently-under-fire Didi has decided to suspend plans to launch in the UK and Europe due to concerns about how it handles passenger data. The company had secured a number of licences to operate in various cities but is likely to postpone operations for at least 12 months, with existing staff facing the possibility of redundancy. China’s latest data protection laws force companies to let them access data upon request. * SO WHAT? * This is just another thing that goes to show how far reaching China’s crackdown is. The ripples continue…

4

INDIVIDUAL COMPANY NEWS

Pfizer goes shopping, Sainsbury’s gets a bid boost, Xiaomi overtakes Apple and consumers have EV wobbles…

In M&A news, Pfizer to buy oncology biotech in $2.3bn deal (Financial Times, Hannah Kuchler and Ortenca Aliaj) shows that Pfizer is surfing its own wave of Covid-powered success buy buying Trillium Therapeutics as it tries to boost its pipeline with a potentially ground-breaking therapy for blood cancers like leukaemia and multiple myeloma. Blood cancers accounts for up to 6% of all cancers around the world and Trillium has two drugs in early-to-mid-stage trials.

Elsewhere, Sainsbury’s rockets on rumours of possible bid (The Times, Alex Ralph and Tom Howard) highlights the 15% share price surge for Sainsbury’s shares yesterday amid speculation it was a bid target for Apollo, the US private equity firm. Neither company has commented and J Sainsbury/private equity: financial engineers eye a supermarket sweep (Financial Times, Lex) implies that although a deal is theoretically possible given the truckloads of cash that private equity players have to invest at the moment, it’s not nearly as attractive a purchase as Morrisons – but it shouldn’t be completely dismissed out of hand…

Then in The world’s hottest smartphone brand is Chinese – and it isn’t Huawei (Wall Street Journal, Dan Strumpf) we see that US sanctions have hit Huawei badly, only to benefit rival Xiaomi, which sells cheap and cheerfully functional smartphones. According to figures from Counterpoint Research, in June, it sold the most phones globally – more than Samsung – and it became the world’s second biggest mobile phone manufacturer in Q2, pushing Apple into the #3 spot. It doubled its market share in Europe to 24% over the last 12 months and became the top seller in Denmark, Belgium, Ukraine and Russia. * SO WHAT? * This is the first time that a Chinese company has been #1 in Europe and marks a historic milestone. Should Apple be afraid??

Electric car makers feel the heat after battery fires see models recalled (Daily Telegraph, Alan Tovey) highlights concerns about EV safety after the most recent recall of Chevrolet Bolt EVs due to safety concerns and a VW ID.3 bursting into flames last week in Holland while recharging. GM has blamed batteries made by LG – and VW also happens to be using them. Funnily enough, Tesla released a report saying that conventional cars were more likely to catch fire, but Birmingham University automotive industry expert David Bailey reckons that EV fires are more likely to hit the headlines because of the difficulties firefighters have in putting them out.

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with the brilliant piece of handiwork in Japanese grade students make working game consoles entirely out of cardboard for their summer homework (SoraNews24, Katie Pask) and the somewhat less-good handiwork by whoever it was who was responsible for the abomination in Woman sold the ‘world’s saddest bacon sandwich’ for £4.70 on Ryanair flight (Metro, Jen Mills). Nasty.

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Some of today’s market, commodity & currency moves (as at 0757hrs 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 **
7,113 (+0.36%)35,335.71 (+0.61%)4,479.53 (+0.85%)14,942.65 (+1.55%)15,853 (+0.28%)6,687 (+0.92%)27,730 (+0.86%)3,516 (+1.12%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$66.02$69.21$1,803.221.373661.17408109.871.1700549,786.11

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