Tuesday 26/09/23

  1. In BUSINESS & CONSUMER TRENDS NEWS, global trade slows, western companies adapt to the China situation, China property woes risk contagion, UK manufacturing responds to Sunak’s retreat, London offices plummet in value, the outlook for retail sales improves, Aldi moves up in the pecking order and Entain bemoans the lack of online gambling
  2. In TECH NEWS, Amazon invests in Anthropic and Huawei impresses with new gadgetry
  3. In CARS & TRANSPORT NEWS, Ford holds back on a controversial battery plant, Nissan commits to all-electric and HS2 faces a reckoning
  4. In MISCELLANEOUS NEWS, the Germany economy remains stuck in a rut, DWS pays the price for greenwashing and staff absences rise
  5. AND FINALLY, I bring you a wild pull-up variation…



So global trade slows, China has issues, UK manufacturing responds to Sunak, London office values plummet, the retail sales outlook improves, Aldi rises and Entain suffers online gambling blues…

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Global trade falls at fastest pace since pandemic (Financial Times, Valentina Romei) isn’t the most positive article to start the day off with, but it cites the conclusions of the latest World Trade Monitor published by the Netherlands Bureau for Economic Policy Analysis (aka “CPB”). Trade volumes fell by 3.2% in July – which is the fastest annual pace for almost three years. As things stand currently, it doesn’t look like there will be any improvement for the short term at least, particularly as geopolitical tensions persist.

Western companies take slow steps towards China ‘de-risking’ (Financial Times, Yuan Yang and Patricia Nilsson) highlights the interesting recent trend of more and more western companies insulating their China operations from the ongoing trade spat between the US and China in a phenomenon referred to as “de-risking” – a softer version of “de-coupling” which implies a more pronounced split. A report published by the European Chamber of Commerce in China reflected subtle movements as 11% of European respondents said that they’d already reallocated investments out of China and 22% were thinking about it. Interestingly, less than 50% of respondents said that they planned to grow their China operations this year – something that hasn’t happened since 2016! * SO WHAT? * The thing is that China is such an attractive market to be in that companies just can’t help themselves. However, it is a thin line to walk between doing business on the one hand and satisfying the current and future vagaries of US/China trade sanctions on the other – not to mention what could happen if China decided to invade Taiwan. One way of “de-risking” exposure to China is spreading production elsewhere, but staying within the region, in a strategy sometimes referred to as “China plus one” (Apple and Intel, for instance, have broadened their production footprint to India and/or south-east Asia). Another is to go down the “China for China” route whereby China operations are reorganised in such a way that they make goods that are only intended for the Chinese market and supply chains are adapted accordingly. The evolution continues!

Staying with China, China property: accelerating meltdown threatens other markets (Financial Times, Lex) highlights the ongoing issues with Chinese property companies (many of them have massive debts). Since the whole Evergrande thing emerged a few years ago, nervousness has surrounded the sector and investors have become hyper-sensitive to any bad news – Evergrande’s share price dropped 21% yesterday after it cancelled key creditor meetings at the last minute, for instance. Recent jitters about Country Garden (which had previously been seen as a “safe” bet) have rattled investors again. * SO WHAT? * Even if the property sector’s financial problems can be contained in some way, the risk is that there will be repercussions to other sectors. For instance, China purchases around 70% of the world’s seaborne iron ore – but Chinese developers have been buying less steel (steel is made from iron ore). This will, clearly, affect iron ore prices. Considering that China is a major global growth driver for commodities generally, any weakness has repercussions. Thus far, it seems to me that Beijing has decided to fiddle around the edges with cutting interest rates here and providing limited stimulus there when I think that it really needs to make a properly big stimulus that everyone (and every industry!) can get behind. Thus far, it has repeatedly said that there will be no direct bailout. If this drags on, you wonder whether it will cost more than if they made a big statement in the early stages. I think that the longer they leave it, the bigger the stimulus is going to have to be in order to move the needle…

Back home, UK manufacturing groups hit out at Rishi Sunak’s U-turns on net zero pledges (Financial Times, Michael O’Dwyer) shows that various UK manufacturing groups (including the likes of Make UK, the Construction Equipment Association and the Chemical Industries Association) have been complaining about Rishi Sunak’s reining in of climate commitments last week. * SO WHAT? * This was bound to happen given that many players in the industry have to make long term plans and the transition to net zero had, until last week, been a core priority. I said last week in the podcast that Sunak’s move was a relatively “cost-free” one from the government’s perspective (because they weren’t paying out money in the form of incentives etc.) but as we all know, nothing ever comes truly free! Industry is potentially going to be paying the price given that the urgency of net zero has taken a serious blow. However, I would argue that moves were not universally progressing sufficiently quickly and that the extra time now means that there is less risk of being overcharged so that panicked companies won’t have to pay over the odds to make the requisite moves. Making such a big U-turn is obviously very destabilising – but if the government does it again I’d argue that it could be a disaster as it’d make investing in the UK a nightmare due to uncertainty. Therefore, if Labour wins at the next election, I’d say that it would be extremely difficult to switch it back again. As anyone who has ever forgotten to do their homework will know, pushing deadlines back is not a nightmare – bring them forward, however, is!

Then in London offices lose nearly a fifth of their value in a year (The Times, Tom Howard) we see that, according to data from BNP Paribas, offices in London have lost 17.1% of their value over the last year – which is way more than is the case in other countries. Commercial property prices have generally had a big shake-up because of all the interest rate rises being imposed by central banks around the world. It’s made debt more expensive which has meant that investors have sought better returns more assiduously than before, which in turn means that they have bought less than did previously, pushing down prices. The only place that has seen a worse fall is Amsterdam, where prices have fallen by around 23% year-on-year. * SO WHAT? * The London office market is very liquid and you could argue that the weak pound, in addition to this sharp price drop, is presenting a rare opportunity to would-be buyers. I would expect overseas buyers to wade in first, though, particularly given the state of sterling at the moment!

In consumer trends, Clothing holds back retail sales but outlook improves (The Times, Jack Barnett) cites the latest figures from the CBI which show that retail sales have fallen for the fifth consecutive month but at a slower rate than August. September’s weakness was thanks to particularly slow sales of apparel but retailers are generally confident that things will continue to bottom out amid rising hopes that spending will continue to improve.

So where and what are consumers spending their money on? Aldi no longer a second-stop shop, says boss (Daily Telegraph, Hannah Boland) suggests that more people are spending their money at Aldi as its UK chief exec says that it continues to win over shoppers from other supermarkets, going as far as saying that they are “treating Aldi very much as a first-stop shop”. FWIW, I think that one of the best ways of shopping is to a) have a list, b) stick to that list, c) go to Aldi first and get stuff there that is on your list (although maybe not veg or some of the meat) whilst avoiding the temptation of the middle aisle and then d) go to the “big” shop. * SO WHAT? * At some point, when the economy eventually recovers, some shoppers may be tempted to “trade up” again, but TBH I think that the main difference between the German discounters and the incumbents is the variety that the latter have, so I think that they will be able to hang on to a lot of their recently-acquired customers. This is going to sound a bit weird, but I wonder whether – in the same way that Sainsbury’s, Waitrose and Tesco’s etc. have introduced “basics” ranges to keep shoppers from “trading down” to cheaper supermarkets – the likes of Aldi and Lidl will introduce “premium” ranges to prevent customers from “trading up”.

Then in Entain warns of decline in online gaming revenues (Financial Times, Oliver Barnes) we see that the owner of Ladbrokes, Bwin and Coral is suffering due to a slowdown in online gaming revenues. Entain puts this down to increasingly stringent restrictions on gambling – but it’s also due to unfavourable sports results, which meant that it had to pay out more than it had planned to! The share price took an 11% hit in early trading yesterday, leaving them at their lowest level since 2020! On the plus side, the company left full year earnings guidance unchanged and its US joint venture BetMGM put in a strong performance.

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!



Amazon invests in AI and Huawei impresses…

In Amazon to invest up to $4bn in AI start-up Anthropic (Financial Times, Camilla Hodgson and Richard Waters) we see that Amazon is planning to put up to $4bn into Anthropic in a bid to stay in the AI game with Microsoft, Google and Nvidia. This will start off with an initial $1.25bn for a minority stake in Anthropic, with a view to that sum being increased over time. * SO WHAT? * Much in the same way that Microsoft is benefitting from its close relationship with OpenAI, Amazon looks like it may be trying to do the same thing with Anthropic. This is particularly interesting as this latest development makes it look like Anthropic is moving away from Google, which put $300m into it last year (although Anthropic denies this). NB Anthropic was founded by a group of ex-OpenAI employees. Amazon/AI: tech arms race continues with Anthropic investment (Financial Times, Lex) points out that this will not suddenly put Amazon on an equal footing in AI with the likes of Google and Microsoft, but it does fit well with Amazon’s ambitions to make chips and it is a step in the right direction. Amazon has

easily got deep enough pockets to throw money at Anthropic, so things could get pretty interesting from here!

Then in Huawei’s New Gadgets Show How China Aims to Move Forward Without Foreign Tech (Wall Street Journal, Yang Jie) we see that Huawei appears to be doing just fine despite US sanctions on the export of advanced chips as it just released its latest tablets, smartwatches and earphones. It has even designed an alternative to Bluetooth and Wi-Fi, called NearLink (which was initially nicknamed “greentooth”), which a hybrid between the two offering low-power, lightweight Bluetooth-like connectivity and higher quality Wi-Fi-like connectivity. * SO WHAT? * Given the US-China tensions, it makes perfect sense for Chinese tech companies to become more independent. The problem will come when they decide to make inroads into markets outside Asia as there will no doubt be resistance by European and American tech companies in particular to cheaper Chinese product (which is something that we’re seeing a lot of at the moment!).

Want to engage with myself and the team at Wats12on’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!



Ford has a battery wobble, Nissan commits to electric and HS2 mitigation rumours abound…

Talking about wariness about Chinese, Ford Pauses Construction on Politically Divisive Battery Plant (Wall Street Journal, Nora Eckert and Andrew Duehren) shows that Ford has put the construction of its $3.5bn battery plant in Michigan on hold until it is more certain about its ability to operate it competitively. The plant is to produce lower cost batteries using tech form CATL, the Chinese battery making giant. Work has been stopped with immediate effect after facing months of scrutiny about its work with CATL, with critics arguing that it would enable Chinese domination of the US automotive industry. * SO WHAT? * If this closure continues, Ford’s ambitious EV targets will become increasingly difficult to meet…

Then in Nissan all-electric by 2030 in snub to Sunak (Daily Telegraph,  Gareth Corfield) we see that Nissan has decided to go

all-electric in the UK by 2030 despite Sunak’s pushing back of the deadline. The company unveiled its latest battery design yesterday. * SO WHAT? * I think it is total garbage to say that this is a snub to Sunak! Car companies have to make plans years in advance and so this announcement was no doubt going to happen anyway and Sunak’s roll-back to 2035 probably stole their thunder. On the plus side for Nissan, at least they have an excuse now for if they fail – they can just blame the UK government!

Talking about roll-back and blaming the government, Sunak may seek to limit HS2 fallout with new transport projects in north (The Guardian, Pippa Crerar and Ben Quinn) highlights speculation that the PM could announce various transport improvements for the north of England to soften the blow of potentially cancelling the Birmingham to Manchester link for HS2. The speculation and rumours continue!

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!



Germany’s economy stays in a rut, DWS pays the price for greenwashing and staff absences hit new highs…

In a quick scoot around some of today’s other interesting stories, German economy is still stuck in the mire (The Times, Jack Barnett) highlights the conclusions of the latest Ifo survey which reflect business activity which has now fallen to levels that are hovering around five-year lows while Deutsche Bank’s DWS to pay $25m to settle SEC probes (Financial Times, Stefania Palma and Olaf Storbeck) shows that the German asset manager has agreed to pay to settle over allegations of greenwashing of ESG investments. * SO WHAT? * This is the highest penalty incurred by an investment adviser related to ESG. The SEC launched its greenwashing investigation two years ago – so I guess this draws the line under the whole debacle and DWS can just carry on with its business and put it all behind.

Meanwhile, there’s a lot that been made today of stories like Staff absence rates highest in a decade (The Times, Dominic Walsh) as the CIPD published results today of a survey that reflected the current state of workplace absences. Employees are now absent for an average of 7.8 days per year versus the 5.8 days average pre-pandemic. Stress appeared to be a significant factor. * SO WHAT? * I have to say that I believe a big chunk of this is perhaps due to a change in thinking about soldiering into work when you’re feeling less than 100%. I would argue that, perhaps in the past, we just went in saying “Ah it’s just a cold” and crack on whereas now everyone is probably afraid that the sniffles and coughing could be a sign of that you have Covid. I also think that much more is made of mental health these days than it was in the past – and so people are perhaps more apt to slow down rather than hope that they can just push on through.

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!



…in other news…

Do you find “normal” pull-ups too boring? Well how about this variation?? If you decide to give this a go, you do so at your own risk! But if you do, make sure you warm-up thoroughly first to minimise the risk of injury 👍 Also, make sure you have clean and very dry hands!

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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)