Wednesday 03/10/18

  1. In UK CONSUMER NEWS, London house prices fall but shop prices go up
  2. In RETAILER NEWS, Amazon increases its minimum wage and a Belarus supermarket looks at a London listing
  3. In IPO NEWS, Tencent considers the US and UK fintech floats could face a slowdown
  4. In INDIVIDUAL COMPANY NEWS, Tesla hits production targets and the FDA held a surprise inspection at JUUL
  5. In OTHER NEWS, I bring you a new way of cooking a trad full-English and an endorsement of jazz hands over clapping. For more details, read on…



So London house prices fall and prices in the shops go up…

House prices fall again in London amid uncertainty (The Guardian, Angela Monaghan) cites the latest data from Nationwide which shows that London house prices fell for the fifth consecutive quarter as higher prices, increased stamp duty on second homes and Brexit continue to bite. London prices fell by 0.7% in the third quarter but house prices across the UK increased by 0.3% last month following the worst drop for six years in August. * SO WHAT? * Yes it’s boring, but unfortunately it IS important 

to watch this kind of thing as house price rises generally make people feel richer and more likely to spend whilst the opposite is true when they start to wobble or fall. 

Era of discounting ends as shop prices tick up (Daily Telegraph, Tim Wallace) looks at figures published by the British Retail Consortium (BRC) which show overall shop prices increasing by 0.2% on the year, which signals the fastest rise in inflation since 2013. The BRC said that this was due to less discounting and an increase in food prices following “unusual weather patterns in the first half of the year”. * SO WHAT? * 0.2% doesn’t sound like much but I guess it signals a change in direction as it is the second consecutive rise in the BRC’s index. Let’s hope that wages rise faster otherwise we’ll all start feeling poorer!



In retailer news, Amazon ups its wages and a Belarus supermarket is eyeing London…

Amazon set to raise its minimum wage (The Times, Deirdre Hipwell and James Dean) heralds good news for all its British and American employees as they get a pretty chunky wage increase following the company’s to ongoing criticism. Anyone working in London would get an hourly rate of £10.50 versus £8.20 previously and those outside London would get £9.50 versus the £8 they get now. Founder Jeff Bezos said “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead” * SO WHAT? * My @rse. The fact is that both markets have record low levels of unemployment, meaning that there’s more competition out there on the jobs market in terms of attracting workers in the first place and then retaining them. All he is doing is making Amazon a bit more competitive on that front and dressing it up as some 

do-gooder gesture. It will be interesting to see how other employers respond to this as it might make them feel like they have to pay more as well, which could eventually cause inflation to rise as costs are passed on to the end customer.

I thought I’d mention Supermarket chain plans Belarus’s first international IPO (Financial Times, James Shotter) because it is the first ever international listing by a company from Belarus. Eurotorg is the country’s biggest retailer and JPMorgan and Credit Suisse have been picked as global co-ordinators for the IPO, potentially valuing the company up to $1bn in a flotation that is slated for this month or next. It is Belarus’ biggest private sector employer with 33,000 staff – and has a market share f 19% that is five times as big as its nearest rival. * SO WHAT? * Belarus lies between Europe and Russia and the country is constantly trying to balance a wish to be closer to Europe whilst not offending Russian sensibilities. I guess this fits into broader moves by the country’s president Aleksander Lukashenko to modernise the economy and attract more outside interest.



In IPO news, Tencent Music eyes the US and Funding Circle’s IPO could delay the ambitions of other fintech companies…

In Tencent Music files for US IPO (Wall Street Journal, Maureen Farrell and Anne Steele) we see that Tencent Music Entertainment kicked off what could be one of the biggest tech IPOs ever as it filed to go public in the US yesterday. Tencent Music is China’s biggest music streaming company and is part of the internet behemoth that is Tencent Holdings. Revenues in 2017 were a whopping $1.6bn, with about 70% of its revenue coming from social entertainment services including online karaoke, live streaming and merchandise sales. It also reported recently that it had over 800 million total unique monthly active users and some are saying that the company could be valued at over $25bn. * SO WHAT? * If this all goes ahead, Tencent Music would be the second streaming giant to float this year after Spotify completed its direct listing in April. I guess that a New York listing would be good to raise the company’s profile internationally and it will no doubt try to blind investors 

with promises of stellar user growth. However, the fact remains that its paying user base is smaller than Spotify’s and that it is banking on investors not caring too much about a dual-class structure that will mean they will probably have b*gger all say in how the company is run. Still, a chunky advisory fee looks like it’s up for grabs!

Lender’s fall casts doubts over fintech (The Times, Harry Wilson and Simon Duke) gives us an interesting snapshot of Funding Circle’s current travails as one of London’s home-grown “unicorns” lost almost 20% of its value before its first official day of trading on the LSE today. Other potential fintech debutants such as TransferWise, the money transfer service and Monzo, the online bank, are likely to be underwhelmed by the news and any failure (or perceived failure) here could dent ambitions for the LSE to increase its exposure to fintech companies. One senior tech industry source said that “I’m not surprised by the fall. The valuation they sought was almost 20 times revenues when other financial services businesses are traditionally trading at around three to four times”. * SO WHAT? * It might be a bit early to read too much into this but this is something that the LSE doesn’t need right now as it may well make other fintech candidates think a bit harder about coming to market – or even worse, go and list somewhere else.



In individual company news, Tesla hits production targets and Juul gets inspected…

Tesla finally hits production target only for deliveries to disappoint (Financial Times, Richard Waters and Camilla Hodgson) highlights some good news for the company as it has finally managed to meet its quarterly production target for the model 3, but it is now facing delays in distribution with model 3s stacking up around the US waiting to be delivered. * SO WHAT? * This is “sort of” good news, but distribution delays are still delays as far as the end customer is concerned, so the company will need to get this sorted PDQ. It does sound like Tesla is edging 

towards its goal of being profitable in the third quarter, though!

You may recall recent news of the US Federal Drug Administration (FDA) potentially banning flavoured e-cigarettes – well FDA conducted surprise inspection of Juul’s headquarters (Wall Street Journal, Jennifer Maloney) shows it following through on its promise to focus on the industry and, in particular, why it appeals so much to youngsters. Juul represents 73% of the $2.5bn US e-cigarette market and one data source says that as many as 20% of high-school students have used e-cigarettes in the past 30 days. * SO WHAT? * If the FDA really decides to crack down on this, Juul – and any other pure plays in e-cigarettes, for that matter – is going to be toast given its massive exposure to this market. It’ll be interesting to see how this plays out



…And finally, in other news…

I thought I’d leave you today with a story that has just gone a bit mental on Twitter – Manchester Students’ Union bans clapping and says jazz hands should be used instead (Metro, Richard Hartley-Parkinson as well as a novel way to do the traditional British brekky in Mum reveals her unique way of cooking a full English breakfast – and it’s blowing people’s minds (The Mirror, Caitlin O’Sullivan and Courtney Pochin Nice!

As always, thank you for reading Watson’s Daily!

Some of today’s market, commodity & currency moves (as at 0735hrs 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 **
7,482 (-0.17%)26,785 (+0.50%)2,923 (-0.03%)7,99912,280 (-0.48%)5,466 (-0.73%)24,134 (-0.51%)2,821 (+1.06%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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