Wednesday 03/02/21

1. In MACRO & VACCINE NEWS, the Eurozone double-dips, Brexit creates Northern Ireland nastiness and the government embraces state aid while Sputnik succeeds, the Balkans seek out alternative solutions, Oxford/AstraZeneca has good and bad news and Pfizer benefits
2. In CONSUMER-RELATED NEWS, UK property prices fall, UK gambling faces crackdown – as does “buy now, pay later” and the GameStop party loses momentum
3. In ONLINE RETAIL NEWS, Alibaba does well but needs to be wary, Bezos steps down and Moonpig makes a strong debut
4. In MISCELLANEOUS NEWS, Big Oil suffers, Google benefits from ads, Tesla does a recall and Uber buys Drizly
5. AND FINALLY I bring you a Frenchman trying a Greggs sausage roll and unusual takeaway instructions…

So the Eurozone stutters, Brexit causes problems in Northern Ireland, the government dives into state aid and we get the latest in vaccine news…

Eurozone economy drops into double-dip contraction (Financial Times, Martin Arnold and Valentina Romei) cites the latest data from Eurostat which shows that the eurozone economy contracted again in the final quarter of last year, although not by as much as economists had been expecting. This had followed a previous quarter of growth but, hey, we all know that when you shut stuff down again it has an impact.

Gove urges Brussels to take action as Northern Ireland tensions rise (Financial Times, George Parker, Arthur Beesley, Mehreen Khan and Michael Peel) highlights ugly scenes fuelled by Brexit as the government will ask the European Commission to relax restrictions on post-Brexit trade between Great Britain and Northern Ireland as checks on food from Great Britain were suspended following threats to staff trying to enforce new trade rules. Michael Gove will be meeting with the European Commission’s Maros Sefcovic today to discuss what to do about the increasing anger brewing over Northern Ireland. That whole vaccine thing at the end of last week where Europe was going to stop Northern Ireland from getting the vaccines which led to a very embarrassing U-turn has ignited more criticism towards the bloc and could yet have further repercussions.

Staying on the subject of Brexit-related matters, Government uses Brexit to embrace state aid (Daily Telegraph, Tim Wallace) shows that ministers will be meeting today to discuss new rules that will accelerate the state aid process and make it much easier to pump money into industry. The idea here is to break away from the limitations of the EU rulebook and come up with new guidelines on how to finance companies and create local jobs .

In vaccine-related news, there’s good news in Russia’s Sputnik vaccine shows 91.6% efficacy in clinical trials (Financial Times, Donato Paolo Mancini and Max Seddon) as the two-shot vaccine got the thumbs-up from a peer review published in The Lancet. Initial reports of its efficacy were treated with scepticism due to its very early rollout, but it seems that Vlad was right to gamble with the vaccine. Maybe this will help to convince the 54% of Russians who are doubtful about taking it…

Balkan nations turn to China and Russia for jabs (Financial Times, Valerie Hopkins) shows that patience continues to wear thin on the Continent as countries like Serbia have gone ahead and ordered Chinese and Russian-manufactured vaccines. * SO WHAT? * When you realise that four out of six Balkan states aspiring to join the EU have not received ANY vaccines, you can understand why citizens say that when the 💩 hits the fan, it’s China and Russia who come to the rescue – not the EU. If thinking like this spreads, this could be bad news for the EU. The situation will be made harder IMO with the news about the efficacy of Russia’s vaccine. Having said that, there are countries that have a historical mistrust of Russia and China – such as Albania – that will continue to hang on for the Europeans, but they really need to pull their finger out.

Meanwhile, Oxford/AstraZeneca study supports UK decision to delay second doses (Financial Times, Donato Paolo Mancini and Sarah Neville) shows that one dose of the Oxford/AstraZeneca coronavirus vaccine is still 76% effective up to 12 weeks after the injection, which will be a relief for the government who took the chance of extending the gap between doses but then French panel advises against giving Oxford/AstraZeneca jab to over-65s (Financial Times, Leila Abboud) shows that scientific advisers in France think that there isn’t enough data to show that the jab is effective for older recipients, further exacerbating the problem of vaccine numbers in the country. Still, Pfizer reaps reward of its vaccine with $15bn in sales (The Times, Callum Jones) shows that America’s #1 pharmaceuticals group said yesterday that its vaccine would rake in $15bn of revenues in 2021 – about a quarter of their entire pot! This stands in stark contrast to Oxford/AstraZeneca’s approach not to make profits from their vaccine. It seems that their intentions are good, but Pfizer’s execution is better…

UK property prices weaken, gambling and “buy now, pay later” will face scrutiny and the GameStop thing loses momentum…

House prices drop as end of stamp duty holiday looms (Daily Telegraph, Melissa Lawford) cites the latest figures from Nationwide which showed that house prices in January fell by 0.3% from December as the prospect of the end of the stamp duty holiday on March 31st appeared to dent demand. * SO WHAT? * I must say that I thought activity would intensify going into the deadline, but then again I suppose that there are only so many transactions that will be able to be processed in time. Maybe now consumers are willing to wait because house prices may drop considerably from April onwards meaning that buyers will be able to get their £15,000 saving anyway. The only problem here is that there may not be so many sellers then (although there may be bargains for buyers to be had as I would have thought that a higher proportion of sellers may be forced – perhaps by unemployment – or at least very keen to move).

There’s potentially bad news for UK gamblers in UK gambling regulator targets online slot games (Financial Times, Alice Hancock) as the Gambling Commission, the UK’s industry regulator, yesterday announced a crackdown on online slot games as one of the most addictive types of online gambling – specifically, there will be a ban on fast spin speeds and autoplay functions as well as sounds and images that overplay gamblers’ winnings. This is the first step in what is expected to be a series of rule-tightening that is meant to bring regulation up to date with developments in the digital world and its ever-increasing role in our lives. The government is considering other things like bans on sports sponsorship, advertising and checks on what punters can actually afford. * SO WHAT? * Campaigners have been pushing for limits on the amount of money being bet online and when you consider the disastrous effect this had a few years back on Fixed Odds Betting Terminals (FOBTs), which had been described as the crack cocaine of gambling, this could be pretty damaging to the industry. Interestingly, PwC came up with research which showed that gamblers could then migrate to black market sites as a result of this crackdown, but the Gambling Commission batted that away, saying that the conclusions were “exaggerated” by “consultants paid for by the industry”.

In another area ripe for scrutiny, ‘Buy now, pay later’ firms such as Klarna to face FCA regulation (The Guardian, Julia Kollewe and Kalyeena Makortoff) shows that the financial regulator, the FCA, will be given oversight powers of the “buy now, pay later” (BNPL) firms such as Klarna. Laybuy and Clearpay, as their increasing popularity under lockdown could leave consumers with big debts. * SO WHAT? * I think this is WELL overdue given that this sort of stuff is aimed at millennials and Generation Z consumers who have suffered exponentially in terms of employment. The temptation to salve the lockdown boredom with a bit of e-tail therapy is a ticking timebomb IMO as the model works well in times where unemployment is ultra-low and everyone’s got money to spend, but less well when people are losing their jobs and having their income cut. Now that these companies come under the FCA, they will have to conduct proper affordability checks before lending and treat payers properly if they get into difficulties. It’ll be interesting to see what effect this will have on BNLP company profits!

Then in Game over as Reddit share frenzy runs out of steam (The Times, Patrick Hosking and Ben Martin) we see that the GameStop trading frenzy appears to be losing momentum as shares in the videogames store chain fell by 48% yesterday to $188 after reaching a peak of $483 last week! Redditors also tried to attack the silver price, but they fell by over 5% after reaching a four-year high on Monday. AMC Entertainment dropped by 39% in trading yesterday also. * SO WHAT? * I think that last week made enough of a splash to ensure that this herd trading will stick in the minds of traders and would-be traders alike, so I would see this as a pause for breath rather than the end of a flash-in-the-pan. In the meantime, I think that regulators should get involved to protect investors from themselves.

Alibaba does well, Bezos steps back and Moonpig makes its debut…

There were some interesting developments in retailing in the form of Alibaba celebrates China’s virus recovery (The Times, Callum Jones), which showed that the world’s second biggest e-tailer beat Wall Street expectations in the latest quarter thanks to record sales in its commerce division but then Alibaba: growing pains (Financial Times, Lex) highlights the potentially tough road ahead as Beijing continues to crackdown on e-commerce and fintech sectors – Alibaba’s main areas. * SO WHAT? * The increased scrutiny of the company’s business practices will no doubt rein in previously stellar growth rates but the business is still likely to grow – just at a more “normal” pace.

Jeff Bezos to step down as Amazon CEO; Andy Jassy to take over (Wall Street Journal, Dana Mattioli) heralds a momentous point in Amazon’s history as its founder is stepping down as chief exec and become its executive chairman, handing the hot seat in the third quarter to Andy

Jassy, who was until now head of the company’s cloud computing business. The announcement was made as the company reported a whopping 44% hike in revenues for the fourth quarter and a doubling of profits. Bezos says he will now concentrate on new products and early initiatives. * SO WHAT? * I think that this is a healthy thing for the company – and anyway, he’s not leaving completely! Still, there are some big issues coming up with potential closer scrutiny of Big Tech so things could be about to get a bit trickier.

Closer to home, Love is in the air for Moonpig despite Valentine warning (The Times, Ashley Armstrong) highlights the success of Moonpig’s market debut as it shot up by 17.5% despite revelations in the prospectus that Valentine’s Day sales could be scuppered by coronavirus lockdown at its facilities in Guernsey (although one person said that this was a risk rather than a material concern). Interestingly, Moonpig float sizzles, but investors risk getting burnt (Daily Telegraph, Ben Marlow) is a bit more critical about the valuation, saying that it is a bit rich for a gift company with a website. Private equity will once again be the winners here. * SO WHAT? * There is a danger here that investors are willing this stock to get a tech valuation and although they have clearly done well under lockdown, how long will this actually continue afterwards?

Oil hurts, Google loves ads, Tesla does a recall and Uber buys Drizly…

In a scoot around other major stories today, Big oil hit by record losses from pandemic and clean fuel (Financial Times, Derek Bower and Anjli Raval) highlights big losses by oil majors including ExxonMobil (America’s biggest oil producer), BP, ConocoPhillips and they remain cautious about the prospects of a recovery this year. * SO WHAT? * I must say that I wonder why they are so downbeat as a vaccine-led recovery is surely on the cards, no? This should mean an uptick in global trade and stimulatory spending programmes around the world that will include the building of infrastructure etc. that all usually boost demand. China is also very much on the recovery track already! Still, when you’ve had a year like they’ve had, I guess it’s hard to lift yourself out of that mood…

Elsewhere, Google rides global ad recovery to record revenue (Wall Street Journal, Georgia Wells) highlights record revenues for the fourth quarter on the back of ad spending (although its cloud division continued to make losses) and Touchscreen fears spark Tesla recall (The Times, Callum Jones) shows that Tesla is going to do a recall of 134,951 vehicles after a recommendation from the National Highway Traffic Safety Administration to sort out touchscreen problems. No doubt Musk needs more time to sort this out which possibly explains why he’s decided to lay off Twitter for a bit in Musk Twitter break after posts lead to spike in shares (Daily Telegraph, James Cook).

Then in Uber’s $1.1billion Drizly deal set to turbocharge online alcohol delivery (Wall Street Journal, Preetika Rana and Saabira Chaudhuri) we see that Uber is continuing in its efforts to broaden its business.

…in other news…

What do you get if you cross a Frenchman with a Greggs sausage roll? Find out in Frenchman tries Greggs sausage roll for first time and doesn’t hold back brutal opinion (The Mirror, Courtney Pochin). It ain’t pretty. Then I thought I might as well stay with the take-out theme in Takeaway pizza driver left in stitches by customer’s warning on delivery instructions (The Mirror, Luke Matthews). Decent instructions!