Tuesday 28/05/19

  1. In MACRO, MARKETS AND CRYPTO NEWS, we see the impact of the European elections, market relief as populists falter and Bitcoin’s comeback
  2. In CAR-RELATED NEWS, Fiat Chrysler proposes a merger with Renault, insurance costs rise as complex cars raise repair costs and a Chinese electric car start-up is poised to enter Europe
  3. In RETAIL-RELATED NEWS, shopping centres suffer and Miss Selfridge’s London flagship is on the chopping block
  4. In MEAT-FREE NEWS, Quorn and start-up Meatless Farm ride the meat-free wave
  5. In OTHER NEWS, I bring you an interesting alarm clock and the “full-English” pizza. For more details, read on…



So voters vent in the European elections, markets are relieved and Bitcoin gains…

Brexit party’s storming victory ramps up no-deal pressure (Financial Times, George Parker, Jim Pickard and Sebastian Payne) looks at the effect that the Brexit Party’s unexpected success has had after Nigel Farage’s eurosceptic party took 31% of the vote, winning 29 seats. Incredibly, it is now the joint biggest force in the EU parliament – with the same number of seats as Germany’s CDU, Angela Merkel’s party! Some Conservative leader wannabes will be looking to harden their Brexit stance as a result and be willing to entertain the notion of a no-deal Brexit while Labour is veering towards a more pro-Remain stance as the party lost votes to the vehemently pro-Remain LibDems. Corbyn backs referendum on Brexit deal after voter exodus (The Guardian, Rowena Mason and Jessica Elgot) shows that Jezza finally got off the fence (his a*se must really hurt from doing that) after a long period of faffing about. The European elections prompted voters to get off their collective backsides, with Brits having their second highest turnout (37%) ever. * SO WHAT? * God knows what will happen next. FWIW, I think that the nation is venting its frustration with the “main” parties and is yearning for simplicity – i.e. Conservatives = Leave, Labour = Remain (although that’s only come about because they lost so many votes to the LibDems!). The problem is that it’s NOT that simple. It is also ironic that after over two years of wrangling, the options that are left on the table seem to be everything apart from the deal that May hammered out! No deal is now a possibility once more, as

is a second referendum. If a Leaver gets the PM’s job, a new deal with Europe looks even more unlikely – and I would argue that a Remainer is less likely to become PM given the message from the electorate at these elections. Either way, pressure will build for a general election – but I think that will be even more of a disaster. It would be like playing a football match and your team going 2-0 down with 10 minutes to go. Do you take off all your players and replace them with the reserves team and the deputy manager or do you change your tactics in a bid for victory?? Surely the latter, no? The saga rumbles on…

Markets climb as populists fall short (Daily Telegraph, Jillian Ambrose) shows that European markets were relieved that the march of Europe’s populist parties was not quite as bad as had been feared. Support for far-right and nationalist parties was not as strong as some had been expecting. Most European indexes rose on the back of this, but Italian stocks got a hammering after news emerged that the EU is thinking about punishing the country for failing to reduce public spending. That said, the populists did make gains, but not enough to spoil the pro-EU party.

Then in Bitcoin comeback continues as digital currencies expand (Daily Telegraph, James Titcomb) we see that Bitcoin reached its highest level in over a year as it shot up by 10% yesterday to hit $9,000. This means that the cryptocurrency has risen by almost 70% in May alone! * SO WHAT? * Crypto fans are getting excited by the possibility of there being more acceptance of the digital currency which will be helped by Facebook launching its own digital coin – GlobalCoin – early next year. These currencies will obviously be in competition with each other but the emergence of a digital currency on this very mainstream platform will give more people confidence that other currencies, such as Bitcoin, are legit.



Fiat Chrysler and Renault consider merging, car insurance rises and a Chinese electric car start-up debuts in Europe…

Fiat offers Renault €33bn merger deal (The Times, Robert Lea) is one of the biggest stories gracing today’s broadsheets as Fiat Chrysler Automobiles (FCA) announced plans for a 50-50 merger with Renault to create the world’s third largest automotive group. The enlarged group would have a strong presence in all markets apart from the Far East (which is a bit cr*p because it is probably the most important one!) with vehicles covering all segments from cheap-and-cheerful marques such as Dacia and Lada, through to Maserati and SUVs from Chrysler. By creating an enlarged group, FCA said that it would be better equipped to share the cost of developing electric and autonomous cars, with €5bn of potential costs savings in procurement, manufacturing and R&D. It said that all this would be achievable without closing any manufacturing facilities. Renault shares shot up by 12% and FCA’s by 8% on the news. * SO WHAT? * This sounds like a reasonable deal from a strategic standpoint – and it would even go some way to soothing the relationship with Renault’s Japanese partner Nissan (Renault owns 43% of Nissan, while Nissan holds 15% of Renault currently) if the enlarged group was based in the Netherlands as Nissan would then be allowed voting rights that it currently does not have. The French state owns 15% of Renault and will thus be particularly keen NOT to see mass French redundancies as a result of this deal – although it is possible that cuts could be made in Italy, Poland and Serbia which have low production capacity rates. This deal could take over a year to close, so there’s a lot that could happen in the intervening period. One to watch for sure…

Hi-tech cars drive up insurance cost (Daily Telegraph, Olivia Rudgard) cites the latest report from the AA which concludes that the cost of repairing complex modern cars is driving up insurance costs. The increased prevalence of driving assistance gadgetry as well as rising prices of “basic” parts like headlights and windscreens means that we are all having to pay more for our insurance. Premiums

rose by about 2.7% in the final quarter of last year – the first rise for 18 months. Gareth Davies, head of motor insurance at More Than, put it best when he said “In-car technology such as parking sensors, satnavs and more sophisticated dashboards are becoming much more commonplace. While this is making cars safer and easier to drive, it also means they’re more expensive to repair. Even technology that isn’t broken can sometimes need to be recalibrated after a collision”. * SO WHAT? * OK, so 2.7% isn’t going to break the bank, but it is another thing that is getting more expensive these days along with all sorts of other things (food and petrol, for instance) nibbling away at our disposable income meaning that there’s less to spend on other things.

Chinese electric car start-up to debut in Europe (Financial Times, Patrick McGee and Tom Hancock) heralds the intention of privately-owned Shanghai-based carmaker Aiways to offer its all-electric SUV in Europe early next year. It plans on leasing its electric SUV in April 2020 in the EU, Switzerland and Norway in an attempt to break the dominance of German, French, US, Japanese and Korean manufacturers. Aiways says that it will make its offering competitive by not having an expensive dealership network and instead offering its U5 SUV via online leasing only. Monthly prices aren’t being disclosed as yet, but buying the car outright would “definitely” cost less than €40,000. * SO WHAT? * Chinese car manufacturers have been keen to crack the more mature markets of Europe and the US and this might just be an attractive proposition. Not having a dealer network could save 15-20% of profit margins, but there will be some spend on pop-up shops to display the car and offer test drives. The argument goes that many millennials won’t be keen to fork out €30-40,000 for a car given that they’ve grown up with Uber and car sharing, but when they have kids they WILL need one and be willing to pay a monthly fee without all the resale hassle. Having said that, it is one thing to enter a market like Europe – but if there’s no servicing network, any expansion will be dead in the water. Also, will this distribution strategy work? Recently, Elon Musk announced that he would axe his dealerships and go online-only to cut car selling prices – but then made a hasty U-turn a few days later following the backlash from customers and dealerships.



Things continue to be tricky with shopping centres and Miss Selfridge’s biggest store in London faces the axe…

The mood of doom for retailers continues as Shopping centres breach loan terms after stores fail (Financial Times, Judith Evans) shows that UK shopping centres owned by private equity groups like Lone Star and Oaktree are breaching their loan terms because continued retailer failures have led to massive falls in property values. This is expected to lead to a rise in asset sales, which will make prices fall even more. Shopping centres owned by private equity funds are particularly vulnerable to plunging property prices because they tend to have financed the

purchases (especially in the spending spree of 2014-2015) with a lot of debt. The situation continues to get worse. * SO WHAT? * This just goes to show that it’s not just the retailers that are suffering out there – it’s the companies that own the spaces they operate in. Solutions must be found to get new tenants in because no-one likes shopping in a ghost town.

Philip Green to close Miss Selfridge’s flagship London store in July (The Guardian, Sarah Butler) is the rather dramatic headline in today’s Guardian and is a consequence of the current misfortunes of Arcadia Group, its parent. Miss Selfridge’s Oxford Street store is one of the chain’s very few profitable stores and its closure would be in addition to the 23 already earmarked for closure. The store will be leased to another retailer and Miss Selfridge will move into the basement of Topshop next door. Tough times…



Quorn benefits from the Greggs frenzy while Meatless Farm also hopes to surf the vegan wave…

Quorn eyes uplift from growing taste for meat-free options (Financial Times, Emiko Terazono) highlights the success of Quorn Foods as its sales and profits are being powered by the popularity of vegan sausage rolls – from its successful partnership with Greggs – and mycoprotein-based chicken nuggets. Sales of the vegan sausage roll have exceeded initial forecasts by 70% – so things have been going well on the domestic front! Meanwhile, the company is also expecting sales growth of 40-50% in the US where it has been concentrating on selling chicken substitutes – and its nuggets were the fastest-selling product in the meat-free category at Kroger, one of America’s biggest food retailers!

Vegans scent victory in retreat from meat (The Times, Simon Duke) looks at a smaller company, The Meatless Farm Company, that started three years ago and now sells its vegan-friendly mince meat, burgers and sausages in Sainsbury’s and Morrisons and in Greene King and Wetherspoon pubs. The company has grown rapidly and is looking at a valuation by the end of this year of about £100m. * SO WHAT? * This meat-free wave is incredible, no? Companies like Beyond Meat and Impossible Foods have been headline grabbers of late and many of the long-established food companies like Unilever, Nestle and Kerry have been buying up – or investing in – plant-based “meat” start-ups in order to get in on the action. A recent report by Barclays estimated that the market size for meat-free meat could reach $140bn within a decade – so you can understand the excitement surrounding it all! I get the feeling that we are in the early stages of a massive revolution here – and farmers are going to have to adapt to survive.



And finally, in other news…

I thought I’d leave you today with a rather extreme alarm clock in Clever alarm system invented by Japanese railway company will wake even the deepest of sleepers (SoraNews24, Koh Ruide https://tinyurl.com/yyufdl7z) as well as the monstrosity in Benidorm bar sells 2,600 calorie Full English pizza – but it’s dividing opinion (The Mirror, Zoe Forsey https://tinyurl.com/y2t26lfu). OMG ????????????!!!

Some of today’s market, commodity & currency moves (as at 0832hrs 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 **
7,278 (+0.65%)25,586 (+0.37%)2,826 (+0.14%)7,63712,071 (+0.50%)5,336 (+0.37%)21,260 (+0.37%)2,918 (+0.89%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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