Tuesday 30/01/24

  1. In MACRO, MARKETS & OIL NEWS, Hungary gets shirty, Flutter has US ambitions and BP faces pressure
  2. In BUSINESS, EMPLOYMENT & CONSUMER NEWS, Evergrande gets a wind-up order that could hit the whole Chinese real estate sector, some employers watch their employees’ every move and UK shop price inflation slows right down
  3. In CARS NEWS, Toyota puts in a solid performance, GM might have over-committed, BYD feels the squeeze and Renault ditches its EV listing plans
  4. In INDIVIDUAL COMPANY NEWS, Amazon ditches Roomba, Superdry considers drastic action, Ryanair takes a hit and GSK could have a blockbuster on its hands
  5. AND FINALLY, I show you how to pour the perfect Guinness!

1

MACRO, MARKETS & OIL NEWS

So Orban sulks, Flutter wants to head to the US and BP feels the pressure…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

 

Hungary alleges EU ‘blackmail’ (Daily Telegraph, Joe Barnes) follows on from the story I mentioned yesterday about the EU putting pressure on Hungary to approve funds for Ukraine, and now Orbán is saying that he will dig his heels in if the EU gets nasty. This is hilarious. Surely Orbán was blackmailing the EU in the first place by refusing to sign off on the financial package! His bluff has well and truly been called. * SO WHAT? * TBH, though, given he still clearly wants to stay BFFs with Putin, he obviously has to put up a “fight” (or at least look like he is). It’ll be interesting to see what happens next. One part of me feels that it doesn’t sound like this is completely legal because the whole idea of the process here is to make sure that the EU moves as one. Critics could argue that it might be Orbán and Hungary today – but who might it be tomorrow? Who will the EU strong-arm into doing their bidding next?

Then in markets news, Betting group Flutter proposes moving listing from UK to New York (Financial Times, Daria Mosolova and Michael O’Dwyer) shows that another company is looking to ditch the UK to head stateside as the owner of Paddy Power said

it would move its primary listing to New York, subject to shareholder approval. It may keep a secondary listing in London, but in order to be in the FTSE100 it has to be your primary listing. * SO WHAT? * This is just the latest company to decide to ditch its London listing – after miner BHP, building materials group CRH, packaging company Smurfit Kappa and plumbing supplier Ferguson have already done so while travel operator Tui is currently considering such a move. TBH, a lot of these moves make sense IMO as in many cases, their business mix has changed over time (organically or via acquisitions) and it makes less and less sense to have a London listing. It sounds to me like going stateside would be a good move for Flutter given that the prospects for gambling in the UK have been dying since the ban on FOBTs (Fixed Odds Betting Terminals)  came in a few years ago while the prospects in the US have shot right up since the legalisation of sports gambling there. It’s not great for the FTSE100 but I just think that, in this case, it makes a lot of sense for the company itself – particularly when you consider that its US business FanDuel has a 43% gross revenue share of the sports-betting market in the country!

Then in BP under pressure from hedge fund to ditch clean energy strategy (The Guardian, Jasper Jolly) we see that London-based hedge fund Bluebell Capital Partners wrote a letter to BP saying that its clean energy strategy has pushed its share price down and is based on the presumption of a “drastic decline in oil and gas demand, which we consider to be utterly unrealistic”. BP unlikely to swing away from renewables despite activist campaign (Financial Times, Lex) shows that although Bluebell is right to an extent – that since it outlined its green ambitions in 2020 its share price has weakened by 3% – but BP’s strategy has since changed. Investors supported BP’s move last February to rein in its green plans and it seems that its focus on biofuels and EV charging could actually yield pretty good returns.

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!

2

BUSINESS, EMPLOYMENT & CONSUMER NEWS

Evergrande is toast, EY monitors staff and UK shop price inflation loses momentum…

Chinese developer Evergrande ordered to be wound up by Hong Kong court (Financial Times, Chan Ho-him, Kay Wiggins, Hudson Lockett and Thomas Hale) shows that a Hong Kong court has ordered the massively indebted Chinese developer to be liquidated after the company failed to come up with a restructuring plan that would satisfy international creditors. It’ll be interesting to see whether this will be recognised by courts in mainland China as foreign claims generally seem to have little impact and the property slowdown has become a major headache for Beijing. Evergrande is the teetering domino that can topple its real estate peers (Financial Times, Lex) highlights how far the world’s most indebted property developer has fallen as its value now stands at just less than $300m versus its massive debts of $330bn. Normally, in a liquidation process, assets will be sold off to repay part of the debt but in Evergrande’s case, this could take a very long time and there might not be much (or anything) left over for the liquidators. * SO WHAT? * Basically, it seems that everyone has been holding out for a bailout of some kind given the scale of the problem, but it would appear at the moment that there will be no such thing. This is going to be very damaging to the sector as a whole (although maybe that pessimism is already baked in) but particularly damaging to the shadow banking sector whose smaller players could fall like dominoes after one of the biggest, Zhongzhi, filed for bankruptcy earlier this month.

In employment trends news, EY tracks how often staff come into the office (The Times, Tom Howard) shows that EY is now doubling down on how often its UK staff are coming to the office amid concerns that its accountants and consultants are taking the **ss with its hybrid working guidelines. Some senior partners have

now been granted access to anonymised swipe card entry data. Big Brother is watching workers, even at home (The Times, Katie Prescott) highlights behaviours at other companies where employees have been monitored remotely by companies taking screen grabs of their computers every ten minutes to monitor what they are doing, among other things. * SO WHAT? * This is bad, but it is not surprising! The WFH trend swept the globe during the pandemic (actually, I did think at the time it’s a good job that it happened when it did and not, say, 10-15 years ago when we wouldn’t have had the capability!) and many people rather liked it. However, employers pay staff quite a lot of money and it’s only natural that they want to know what they are getting in return! However, some companies take it too far (one company I visited a few years back when I was a headhunter was horrendous – you had to do a swipe card to use the bathrooms and it monitored how long you were in there for!). At the end of the day WFH worked because of the circumstances we were in and then because the labour market was tight (so employees called the shots). Now the labour market is not so tight and companies are looking to downsize, one of the easiest ways to cut numbers is to just look at those who turn up and those who don’t. This was inevitable.

Then in consumer trends news, UK shop price inflation drops sharply to lowest level in almost 2 years (Financial Times, Valentina Romei) highlights some welcome news as the latest BRC figures shows that UK shop price inflation slowed down in January as retailers knocked out the discounts in order to chase the volume. These BRC numbers give an early indication of the direction of prices when official data is published in the middle of next month. * SO WHAT? * This could be seen as a sign that inflationary pressures are easing, which would suggest that interest rates should come down. That being said, the market is expecting the Bank of England to leave interest rates unchanged at its meeting later this week.

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!

3

CARS NEWS

Toyota puts in a decent performance, GM moves too early, BYD feels the pressure and Renault reins in its ambitions…

Toyota Group Global Sales Rose to a Record in 2023 (Wall Street Journal, Kosaku Narioka) shows that the Japanese car company hit a new record high for global sales, reinforcing its position as the world’s biggest carmaker. Performance in Japan, North America and Europe were particularly strong but sales in China were weaker.

Meanwhile, GM Went All In on EVs. Dealers Say Buyers Want Hybrids (Wall Street Journal, Mike Colias) shows that GM, having gone all in on the electrification of its fleet is now concerned that many customers just aren’t ready for the switch to fully electric vehicles. However, some of their car dealerships are saying that they may have missed a trick in largely bypassing hybrids. As things stand at the moment, GM has acknowledged the feedback but has no plans to make any more hybrids in the near future. * SO WHAT? * Toyota, Honda, Hyundai and Kia are the big players in the hybrid market – and they’ve been doing very well out of it. Sales of hybrids in the US shot up by over 50% last year, according to research firm Motor Intelligence. GM got it wrong. What’s their next move??

Then in BYD Shares Fall as China’s Auto Price War Weighs on Bottom Line (Wall Street Journal, Tracy Qu) we see that BYD’s share price took a hit after its latest profit forecast undershot expectations against the backdrop of a price war in the Chinese EV market. * SO WHAT? * You would have thought that this is just a blip for the company. If the price war is damaging to players in the Chinese markets, some companies will always suffer more than others – and when this is the case, the industry will end up consolidating. I would have thought that BYD will be a consolidatOR rather than a consolidatEE given its size and backing.

Then in Renault scraps Tesla rival listing (Daily Telegraph, Matt Oliver) we see that Renault has ditched plans to spin out its EV business, Ampere, and list it on the stock market in the first half of this year. Renault’s boss had previously described Ampere as Europe’s answer to Tesla! What was that guy smoking when he said that 🤣?!?! * SO WHAT? * Unfavourable market conditions were blamed for this turn of events but let’s face it, in EVs, Renault is no Tesla. People are just going all lukewarm about EVs at the moment. Sales of EVs slowed down in both the UK and Europe last year due to high prices and patchy charging networks.

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!

4

INDIVIDUAL COMPANY NEWS

Amazon ditches Roomba, Superdry considers drastic action, Ryanair feels the turbulence and GDK might have a winner on its hands…

In a quick scoot around some of today’s other interesting stories, Amazon drops $1.4bn deal to buy iRobot after EU veto reports (The Guardian, Dan Milmo) shows that the e-tailing giant has had to ban its proposed acquisition of the robot vacuum cleaner company iRobot (which makes the Roomba) because of EU opposition to the deal. * SO WHAT? * Amazon will now have to pay a $94m break fee to iRobot, which then announced that it was cutting 31% of the workforce and booting out its chief exec. The European Commission argued that the deal could reduce competition in the robot vacuum cleaner market. A rare victory for the EC over Big Tech – or maybe Amazon just couldn’t be bothered any more!

In Superdry restructuring could lead to job cuts and store closures (The Times, Dominic Walsh) we see that things have got so bad that Superdry is now considering a company voluntary arrangement (a CVA – remember those?!?) among other options for restructuring. There’s nothing finalised as yet, but any further moves could involve a trimming of the store portfolio and job losses. In the meantime, it will continue to try to cut costs. The company’s share price has plummeted by almost 90% in the last 12 months. Will founder Julian Dunkerton take it private, perhaps??

Then in Ryanair cuts profits forecast after flights removed from online travel agents (The Guardian, Jasper Jolly) we see that the feisty budget airline lowered its profit forecasts for the year after a number of online travel agents decided to remove its flights suddenly from their websites. This is all part of an ongoing needle between Ryanair and online travel agents including Kiwi, Lastminute and Opodo who Ryanair argues are “scamming” customers by charging higher fees. * SO WHAT? * Surely this is just a blip and they will eventually come to some agreement as they do need each other.

On a more positive note, GSK’s new RSV jab set to achieve blockbuster status (Financial Times, Ian Johnston) shows that GSK is on the verge of achieving blockbuster status (when sales hit $1bn) for a vaccine for Respiratory Syncytial Virus that it released a few months ago with Pfizer. We’ll know more when the company reports its full year results tomorrow. * SO  WHAT? * This will come as very welcome news because GSK has found blockbusters to be particularly difficult to come by in the last few years. Arch-rival AstraZeneca’s share price has, meanwhile, shot up by almost 90% in the last five years!

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!

5

...AND FINALLY...

…in other news…

Apologies to those of you who don’t drink alcohol or like Guinness – I can’t please all of the people all of the time 😁 – but for those of you who do, HERE’S how to pour one properly – and if you want to get extra fancy about it, HERE’S HOW TO DO THE SHAMROCK POUR. One to cross off on the list of essential life skills 👍

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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)

 

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