Tuesday 25/01/22

  1. In MACRO, MARKETS & ENERGY NEWS, the Russia/Ukraine situation escalates, markets wobble and gas prices feel the heat while BoJo faces more allegations
  2. In BUSINESS/CONSUMER TRENDS NEWS, European businesses take an Omicron hit, UK businesses face major inflation woes and Ocado does “Dry January”
  3. In TECH NEWS, Facebook has built a new supercomputer while THG and Darktrace have a bad day
  4. In MISCELLANEOUS NEWS, China turns its attention to vaping, Ford halts new orders and Raleigh’s owner attracts an approach
  5. AND FINALLY, I bring you an inspiring story…

1

MACRO, MARKETS & ENERGY NEWS

So the Russia/Ukraine situation escalates, hitting markets and gas prices while BoJo parties on…

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Russia plans to target Ukraine capital in ‘lightning war’, UK warns (Financial Times, Henry Foy, Max Seddon, Laura Hughes and James Politi) shows that the situation is escalating on the Ukrainian border as NATO members are now sending in additional ships, fighter jets and troops in order to push back against what BoJo says could be a potential “lightning war” where the Russians might try to seize Kyiv. The rhetoric and military movements continue to intensify on both sides…

Market turmoil as war in Europe looms (Daily Telegraph, Louis Ashworth) shows that markets are now starting to take note of the Russia/Ukraine/Europe/NATO/US situation and a number of the world’s major markets weakened (it was the FTSE100’s worst day of trading since November) while US markets took a big dive initially before bouncing back into positive territory. Notable fallers include Netflix

(it’s lost 25% of its value in the last week!), Zoom (which briefly fell below its pre-pandemic level) and Tesla (whose Bitcoin stockpile looks like it will be worth less than Tesla paid for it). Bitcoin had a volatile day but it has lost about 29% so far this month.

Threat of a Putin invasion risks further igniting gas prices (Daily Telegraph, Rachel Millard) highlights additional effects of the prospect of Russia invading Ukraine because Europe gets around 40% of its gas from Russia, the majority of which is routed via Ukraine, which means that supplies are highly likely to be disrupted in the event of conflict. Mind you, Gas prices could stay high for 3 years (The Times, Emily Gosden) reflects conclusions from a Goldman Sachs research note which says that energy shortages in Europe are not over yet and that we could see higher-for-longer energy prices, especially if the weather turns a bit colder. Goldman Sachs analysts believe that the supply/demand balance in Europe is going to be tight for the next three years, hence the expectation for higher prices. In the meantime, Britain set to import record levels of gas from the US (Daily Telegraph, Rachel Millard and Helen Cahill) suggests that the UK will be importing record amounts of liquefied natural gas (LNG) this month, most of which will be coming from the US. Does this make you feel warm and toasty?!? Meanwhile, wholesale gas prices shot up by 17% yesterday as tensions increased over Ukraine.

Then, in Boris Johnson rocked by new Downing Street lockdown party allegation (Financial Times, George Parker, Sebastian Payne, Jasmine Cameron-Chileshe and Laura Hughes) we see that there are allegations that BoJo held a birthday party during England’s first lockdown in 2020, contravening guidelines at the time. Here we go again! Everyone is still waiting for the results of the Sue Gray report due out later this week. He really is one party animal…

2

BUSINESS/CONSUMER TRENDS NEWS

Omicron and inflation hit businesses and Ocado does “Dry January”…

Omicron hits eurozone business despite fewer supply chain snags, PMIs show (Financial Times, Martin Arnold) highlights the latest IHS Markit Purchasing Managers’ Index (PMI) which shows that Eurozone businesses had a weaker-than-forecast start to 2022 as activity grew at its lowest rate for 11 months but, on the positive side, it looks like the Omicron effect is proving to be less severe than previous waves.

Mind you, in UK businesses count the cost of surging inflation (Financial Times, Daniel Thomas) we see that there’s another potentially longer term drag on business growth out there in the form of inflation. Much in the way that we saw the effect that higher utility bills were having on a hotel owner in Scarborough, this article looks at the effect inflation is having on a hotel near Sherborne in Dorset. The general manager of the hotel is facing price rises of 12% from his drinks supplier, but has also seen price rises in laundry costs and laundry. Other business owners told of how prices are rising across the board and Goldman Sachs has hiked its inflation forecasts for this year from 5.7% to 7.2%. * SO WHAT? * It just seems to me

that some of these price rises CAN be passed on to the end customer but it does seem that not all of them can be, which is squeezing margins at a time when many businesses need them to be resilient. The situation looks like it is going to get progressively worse before it starts to improve, although the Bank of England could potentially calm things down a bit by increasing interest rates to tame inflation. It also seems that larger companies are better able to absorb price increases than small and medium-sized ones.At least supply chains seem to be improving.

I thought I’d include Ocado alcohol sales lose fizz during ‘dry January’ (Daily Telegraph, Laura Onita) because it highlights some interesting post-Christmas trends! Dry January has meant that alcohol sales fell by 17% year-on-year, or 37% versus December and sales of alcohol-free alternatives were up by 12% versus 2021. It was also interesting to note that consumers were buying goods for wellness – sales of CBD-infused products boomed by 61% versus the previous month and sales of chia seeds grew by a whopping 101%! Avocado sales were up by 301% versus Dec 1st and shots of ginger and turmeric were also popular. Still, sales of cake and desserts are starting to rise…* SO WHAT? * It looks like consumers are still willing to spend after throwing caution to the wind (relatively speaking) ahead of Christmas, but given ongoing price pressures on raw materials and tightening household budgets things are looking quite precarious at the moment. Time for discounters like Aldi and Lidl to shine?

3

TECH NEWS

Facebook announces new tech while THG and Darktrace fall…

In Supercomputer will pave the way to ‘metaverse’, says Facebook (Daily Telegraph, James Titcomb) we see that Meta is building what it bills as the world’s most powerful AI-dedicated supercomputer, called the Research SuperCluster (RSC). It reckons that this machine is up to 20 times faster than current machines and would bring capabilities approaching humans in some areas. Language translation has made big strides and use of the RSC can enable groups of people to talk in different languages all at once. It could also help greatly with content moderation by filtering out harmful material. * SO WHAT? * The supercomputer is set to be completed this summer. It does sound like this will be a real boon to Meta’s move towards the metaverse and (hopefully) making it a safer place. I actually think that safety in the metaverse is even more important than it already is because of the immersive experience it offers and the potential this could have to magnify pressures on mental health because it feels “more real”.

Meanwhile, THG plunges as house broker cuts forecasts (Daily Telegraph, Laura Onita) highlights yet another bad day of trading yesterday for the former stock market darling as THG fell by almost 20%, meaning that it is now worth less than half than when it floated. THG is facing investor scepticism due to corporate governance concerns and the profitability of its tech arm, Ingenuity. Its own broker cut its forecasts (and markets generally don’t like this – the corporate broker is supposed to know the company the best, which implies that it might know more than others) and although there has been strong trading momentum at the beginning of the year there are fears that this could dissipate due to ongoing price rises squeezing margins.

Doubts loom over Darktrace’s well-oiled, high-octane sales strategy (The Guardian, Mark Sweney) highlights another big faller in trading yesterday as the cybersecurity company saw its share price sliding by almost 15% as investors ditched “risky” companies in a flight to quality. Doubts raised by broker Peel Hunt, which point to Darktrace’s style over substance, persist – especially about its growth prospects.

4

MISCELLANEOUS NEWS

China turns its attention to vaping, Ford stops orders and Raleigh’s owner attracts a bid…

In other interesting news developments today, China’s vape queen hit by Beijing investigation (Financial Times, Edward White and Jennifer Creery) shows that Chinese authorities are now looking into claims of corruption at Huabao International Holdings, which makes flavours and fragrances used by tobacco manufacturers, sending its share price down by a massive 65%. China vaping: Chu probe reflects broader e-cigarette crackdown (Financial Times, Lex) highlights other rivals such as RLX Technology and Smoore International have seen their respective share prices fall by 88% and 55% respectively although the current investigations appear to be company-specific at this stage. * SO WHAT? * There is a real danger here that this investigation could well broaden into a bigger attack

on the vaping industry in China that has been able to grow against a backdrop of very loose regulation. It’s all part of President Xi Jinping’s “common prosperity” values and could be its next focus – and we all know what that means! Lots of accusations, chastening, fines and share price cratering…

Meanwhile, Ford shuts off orders for new $20,000 Maverick pickup (Wall Street Journal, Mike Colias) shows that tricky supply chains have meant that Ford has stopped taking new orders for its popular reasonably-priced pickup truck until the summer, so it can catch up on its existing order book. This sort of thing is pretty rare, but given current shortages etc. it is understandable. Then in Dutch owner of Raleigh bikes backs £1.3bn swoop (Daily Telegraph, Laura Onita) we see that US private equity firm KKR is leading a takeover of Accell Group. Accell says that this will help it to expand more quickly and consolidate its position as one of the world’s biggest bike makers. Private equity firms continue their shopping spree!

5

...AND FINALLY...

…in other news…

It’s always good to hear an inspirational story – and this one includes doughnuts, so it’s even better: Woman goes from working in McDonald’s to owning £4.5million doughnut business (The Mirror, Levi Winchester). Pretty impressive!

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Some of today’s market, commodity & currency moves (as at 0756hrs 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 **
7,297 (-2.63%)34,364.5 (+0.29%)4,410.13 (+0.28%)13,855.13 (+0.63%)15,011 (-3.80%)6,788 (-3.97%)27,131 (-1.66%)3,433 (-2.58%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$83.77$86.88$1,840.641.347531.13041113.8511.1915236,073.4

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