Tuesday 27/06/23

  1. In MACRO NEWS, we look at the latest repercussions of the Wagner incident and Germany struggles
  2. In CONSUMER, RETAIL & LEISURE NEWS, there’s more evidence of a slowdown in food price inflation, shops see falling sales, Primark’s owner is confident, Mike Ashley buys more Currys, Ocado gets more investor interest, Gucci buys Creed and Cineworld calls in the administrators
  3. In CAR-RELATED NEWS, Aston Martin accelerates, NIO stalls and Cornish Lithium has to find £10m pronto
  4. In MISCELLANEOUS NEWS, the New York office market gets a boost, Canary Wharf faces tough times, KPMG makes cuts and Hunt puts pressure on banks
  5. AND FINALLY, I bring you Gordon Ramsay cheese/burger hack…



So there are more Wagner repercussions and Germany struggles…

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In the latest on Wagner repercussions, Vladimir Putin accuses Wagner Group leaders of betraying Russia (Financial Times, Polina Ivanova, Lucy Fisher and Max Seddon) reflects Putin’s continued anger at the weekend’s mutiny while Vladimir Putin’s generals vulnerable despite surviving revolt (Financial Times, Max Seddon and Courtney Weaver) shows that Russia’s defence minister and the commander of its invasion force are still in their jobs (if Putin axes them too quickly, it’ll look like he is pandering to Prigozhin’s accusations that they are 💩) and ‘Traitors must be shot’: Vladimir Putin’s truce with Wagner teeters on edge (Financial Times, Max Seddon and Polina Ivanova) highlights a seizure of some of Wagner’s assets and what some pro-war MPs really think (“the only way out for Prigozhin is a bullet in the head”,

according to MP Andrei Gurulyov). However, Aborted coup piles pressure on the Russian economy (Daily Telegraph, Szu Ping Chan) looks at the economic implications of the weekend’s developments. Initially, wheat prices posted a big gain (Russia is likely to be the world’s biggest exporter of wheat and so any disruptions are likely to hit supply), the rouble collapsed (it went to its lowest level versus the dollar for almost 15 months) and gas prices spiked (by 14% initially, then came back). Russia is also facing a shortage of workers thanks to conscription and people leaving the workforce. It is possible that the situation will get worse as the army may well look for more recruits which would put further upward pressure on inflation. Also, more funding may have to be diverted to the war effort which means that those funds will not be able to be deployed elsewhere. Clearly this is a fluid situation, but it doesn’t look great for Russia.

Meanwhile, Germany struggling to beat recession as business sentiment fails (The Times, Helen Cahill) cites the IFO Index for business sentiment which has now weakened for two months running. The index is a closely-followed indicator of economic health and it looks like initial optimism at the beginning of the year has taken a beating as China’s economy is going sideways and the US economy is looking like it could fall into recession. There don’t appear to be any obviously positive catalysts on the horizon…

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!



Food price inflation slows, shop sales fall, ABF sounds confident, Mike Ashley buys more Currys, there’s growing investor interest in Ocado, Gucci buys Creed and Cineworld goes under…

Further to other recent evidence from Lloyds Bank and Kantar, Food price inflation recedes as dairy prices are cut (The Times, Mehreen Khan) cites the latest findings from the BRC which show that food price inflation slowed this month as retailer cut the price of basics such as milk, cheese and eggs. There’s been a lot of pressure on supermarkets over pricing (there have been a lot of accusations flying around of “greedflation”) and they have responded to some extent by making some of their items cheaper. Shops suffer falling sales as rising cost of living hits households (The Times, Mehreen Khan) cites the latest CBI monthly survey which showed that retail sales volumes fell by 9% versus the same period last year. * SO WHAT? * The latest indicator that food inflation is slowing down is clearly good news for consumers but the broader picture is not looking good for retailers. Household incomes continue to get squeezed and I suspect that many people up and down the country who have thrown caution to the wind after lockdown and spent anyway are probably going to HAVE to change their spending habits.

Among the retailers themselves, Primark owner upgrades profit outlook as shoppers seek holiday outfits (The Guardian, Mark Sweney) shows that the owner of Primark, Associated British Foods, has done well enough over the last quarter to upgrade its profit forecast for this year. ABF (which owns brands like Ovaltine, Ryvita, Kingsmill and Twinings – as well as Primark) saw group sales increase by 16% and sales at Primark were up by 13%. Crucially, it said that Primark was still able to pass price rises on to customers.

There seems to be more stake-buying going on as well in Mike Ashley takes 10pc stake in Currys as retail empire expands (Daily Telegraph, Daniel Woolfson) as Frasers Group has increased its stake in Currys from 9.4% to 10.4% as well as buying more shares in AO World to take his holding up to more than 22%. Frasers is currently the biggest shareholder in AO World and second biggest

shareholder in Currys. Then in Agnelli-backed fund increases Ocado stake (Financial Times, Laura Onita and Harriet Agnew), we see that Lingotto Investment Management, chaired by ex-UK chancellor George Osborne and backed by Italy’s powerful Agnelli family, has increased its stake to beyond the 5% disclosure threshold. This is particularly interesting given the bid speculation surrounding Ocado and Amazon. * SO WHAT? * On the surface, at least, it seems that the stake-building is more opportunistic than anything else – but I think that Frasers Group’s acquisitions are so chunky that there may be something more behind it…

I also thought it was worth mentioning Gucci Owner Is Buying Perfume Maker Creed to Grow Its Luxury Empire (Wall Street Journal, Nick Kostov) as Kering announced that it is buying the 263-year-old cologne maker Creed as part of its plans to expand further into cosmetics and fragrances. This is a big step towards it building a new beauty division and bringing this sort of thing in-house rather than licencing its name out, which is what it has been doing up till now. The idea is that fragrances can be a gateway to a label as customers start with the purchase of a perfume or cologne and then move up the scale to other products. Kering bought Creed from BlackRock’s private equity division without disclosing the price. * SO WHAT? * Kering launched its new beauty division earlier this year to support its stable of brands, which include Bottega Veneta, Balenciaga, Alexander McQueen etc. Given the success of various celeb-centric brands in the beauty segment (think Kardashian brands like KKW Beauty and Kylie Cosmetics and Rihanna’s Fenty Beauty, for instance) I think that this makes a lot of strategic sense.

Meanwhile, in leisure, Cineworld calls in the administrators (The Times, Dominic Walsh) heralds a new phase for the world’s second biggest cinema chain as it emerges from Chapter 11 bankruptcy protection. There will be a debt restructuring which will eventually result in its debt falling by $4.5bn. Cineworld was founded in 1995, has around 750 sites in ten countries globally, floated in 2007 but came unstuck most recently because of a lockdown acquisition that put it into massive debt at a time when people weren’t allowed to go to cinemas. It will officially be “business as usual” but you’d imagine that, with the finances in the state that they are, there’s going to be some slimming down to come at some point in the near-ish future!

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!



Aston get closer to the Saudis, NIO lags and Cornish Lithium is up against it…

Aston Martin aims to hit adjusted profit and revenue targets by 2024-25 (Financial Times, Peter Campbell) shows that that the carmaker will be outlining midterm targets today, potentially lifting the number of cars sold from 6,400 last year to a peak of 17,000 per annum while Aston Martin and the Saudi electric master plan (Daily Telegraph, Howard Mustoe) highlights Aston striking a deal with America’s Lucid to buy its batteries, motors and drivetrains, which will save it a ton of money in the switch to electrification (it aims to launch its first battery-powered car in 2025. This is great for Aston, because it will bring its costs down – and it will be great for Lucid, which needs the money! It also brings Aston closer to Saudi Arabia’s sovereign wealth fund – the Public Investment Fund – which controls Lucid and is now Aston’s second biggest shareholder. Interestingly, the PIF also held shares in McClaren, but sold them in the last few days to Bahrain’s state investment fund. * SO WHAT? * Aston Martin has been sailing very close to the wind of late in terms of financials, so these latest developments will no doubt play a big factor in helping it NOT to go bust yet again!

Meanwhile, China’s ‘Tesla Killer’ Stumbles as EV Price War Takes Toll (Wall Street Journal, Raffaele Huang) shows that Chinese EV start-up NIO is now suffering as EV makers cut prices in a bid to boost sales volumes. It has had a weak couple of quarters but thankfully an Abu-Dhabi government-backed group announced a $740m investment in NIO last week. The company says that it expects things to bounce back after recently launched a new SUV. * SO WHAT? * NIO suffered because it was one of the last companies to reduce prices – and it shows that customers are very price sensitive in this segment. Overall sales growth of EV and hybrid vehicles has has fallen in the first five months of this year to 41% versus the triple-digit increases they experienced in 2021 and a lot of 2022. A price war is on, but people may need to see more to tempt them to buy big ticket items in a cost-of-living crisis.

Then in Cornish Lithium races to avert £10m funding crash (Daily Telegraph, Oliver Gill) we see that the plucky British start-up has got to source £10m by the end of July in order to avert collapse. Talk about the death of UK hopes in being at the forefront of EVs! I know it was a long-shot, but it’s such a shame that big hopes like Britishvolt have come to nothing – and it looks like Cornish Lithium could be next.

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!



An NY tower helps the office market, Canary Wharf faces changes, KPMG makes cuts and Hunt pressures banks on savers…

In a quick scoot around some of today’s other interesting stories, New York office market bolstered by sale valuing tower at $2bn (Financial Times, Joshua Chaffin and Harriet Clarfelt) shows that the Big Apple’s biggest office landlord, SL Green, has agreed to sell a 49.9% stake in Manhattan’s 245 Part Avenue building to Japan’s Mori Trust, giving it much-needed liquidity. SL Green’s share price boomed by 19.8% on the news yesterday and it will no doubt give hope to other players in the office sector. This boost will be much needed given that recent research from broker JLL said that office buildings in New York had lost $76bn from their most recent sales prices.

The office market is also a bit meh over here as well. We heard yesterday that HSBC is planning to leave Canary Wharf after over twenty years there and Canary Wharf vs City: property’s mood music is increasingly off-quay (Financial Times, Lex) suggests that recent employment trends (the increase in working from home) is leading to less of a need for space, which it then prompting a rethink by companies about their office needs. * SO WHAT? * Canary Wharf is particularly reliant on the financial sector,

which is seeing a real change in office space needs, so in order for it to continue to thrive it needs to evolve and welcome other industries. It will have to upgrade office spaces to meet new environmental standards but in the meantime, if more companies choose to up sticks and go elsewhere, the benefits of clustering will diminish and the situation could worsen rapidly if the landlords don’t act quickly enough.

Meanwhile, KPMG to cut 2,000 US jobs as demand for consulting falls (Daily Telegraph, Adam Mawardi) highlights more headcount reduction in consulting – something that has also been going on at EY and McKinsey. Unfortunately, there just isn’t the demand to justify the number of staff that they currently have.

Then in Hunt demands action from banks to reward savers (Financial Times, George Parker, Jane Croft, James Pickford and Laura Onita) we see that banks have been warned by the chancellor to pass on higher interest rates more quickly to savers or else. The argument here is that, yes, you want to make it more expensive to borrow in order to curb spending, but you also need to address the other side of the equation by encouraging customers to save. It sounds like banks are going to have to come up with something now…

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…

Apologies. but if you’re vegan this tip isn’t for you (I’ll try and find a vegan-friendly one for another edition!). However, this Gordon Ramsay tip for cheeseburgers is so simple and yet looks like a great idea!

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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)