Wednesday 05/05/21

1. In MACRO, OIL & VACCINES NEWS, Yellen’s US interest rate chat spooks markets, Saudi Aramco sees strong earnings and Pfizer benefits from its jab
2. In CAR-RELATED NEWS, there’s more chip chit-chat about the chance to change chip supply chains and electric van spending projections rises despite range anxiety
3. In CONSUMER/REAL ESTATE-RELATED NEWS, Sunak hopes spenders will return, mortgage lending hits new highs and the super-rich return to London
4. In MISCELLANEOUS NEWS, Goldman Sachs bankers prepare to return to the office while Odeon prepares to reopen with Bond and drinkers get closer to drinking inside as Match expects a “summer of love” which could then be topped off with synthetic diamonds
5. AND FINALLY, the offers start to flood in for Bill Gates…

So Yellen shakes things up, Saudi Aramco puts in a strong performance and Pfizer gets a nice boost…

In Fear of rising interest rates sends shares tumbling in both US and Europe (The Guardian, Larry Elliott) we see that remarks made by the current US Treasury Secretary, Janet Yellen (who used to be chair of the Fed until Jay took over), about the potential need to raise interest rates put markets in a spin. However, Yellen says she isn’t predicting higher interest rates (Wall Street Journal, Kate Davidson) shows that the Treasury Secretary then walked back these comments later in the day. * SO WHAT? * This isn’t Yellen’s first rodeo. She’s been around the block and KNOWS the effect her comments have on markets. She has spent years being extremely precise about what she says (if you see any of her speeches as the Fed chair, you will see the “why use one word when you can use two hundred” approach which is highly calculated 😂). Although this is only pure conjecture on my part, I suspect this was a planned effort to take the edge off the expectations of the current consumer spending frenzy. I really don’t think this lady says anything frivolously! I do think, however, that this could be a warning shot not to take near-zero interest rates as a given, despite what the Fed might say. It’s perhaps what Jay Powell might WANT to say but can’t because he’s already committed to no interest rate rises for quite some time.

Meanwhile, Saudi Aramco’s quarterly earnings rise nearly a third (Financial Times, Anjli Raval) shows that the Saudi oil giant reported a 30% rise in Q1 earnings thanks to higher oil prices and improved refining and chemicals margins despite reduced production. This was above market expectations and the company itself remains positive for the rest of the year. * SO WHAT? * Saudi Aramco is the latest oil major to benefit from the oil price rebound from the lows of last year and, with the prospects of global demand rising as economies start making up for lost time, it looks like the party will continue.

Then in Pfizer forecasts $26bn from annual sales of Covid vaccine (The Guardian, Julia Kollewe) we see that Pfizer managed to obliterate its own sales forecasts and expects to rake in $26bn of revenue from its Covid-19 vaccine this year alone! It currently accounts for over a third of its annual income. It currently supplies the US, UK, EU, Japan and Israel (among others) and looks like it’s on the verge of signing a contract with Brazil for 100m doses while EC president Ursula von der Leyen announced last week that the EU was about to buy up 1.8bn doses by 2023, which would be enough to inoculate the bloc’s entire population for two years! Ah, what a contrast with the not-for-profit Oxford University/AstraZeneca vaccine.

The chip shortage debate continues and opinion is divided on electric vans…

So on the one hand, we are used to seeing stories like Global shortfall of 2.5m cars estimated as chips crisis puts brakes on production (Daily Telegraph, Matthew Field), according to German chipmaker Infineon 🥱, but Carmakers’ chip shortage set to ease, says supplier (The Times, Simon Duke) shows the same maker predicting that the supply of components will improve by the summer although there will be a volume shortfall that will last into next year. On a broader note, Chipmaker says shortages will lead to supply chain power struggle (Financial Times, David Keohane, Claire Bushey and Joe Miller) shows that the chief executive of another one of Europe’s biggest chipmakers, STMicroelectronics believes that the whole balance between chip manufacturers and customers has to change to ensure that the current situation of widespread chip shortages does not repeat itself. At the moment, chipmakers are effectively forced to hold

inventory in order to facilitate customers’ just-in-time supply chain (for a quick discussion of that in the automotive industry, see THIS), but chief exec Jean-Marc Chéry thinks that customers should take on more inventory themselves and/or agree to more non-cancellable contracts to ensure a smoother and more predictable supply. * SO WHAT? * This whole scenario was caused by an unexpected rebound in demand for cars AND consumer electronics which, coupled with low inventory levels, led to our current state of shortages. This has been made worse because capacity cannot be increased quickly, so I would have thought it would be in everyone’s interest to get together and think of a longer-term solution where supplies can be evened out.

Then in Electric van spending set to hit £16bn (The Times, Robert Lea) we see that a survey conducted by Centrica says that although operators of Britain’s fleets of vans will spend almost £16bn on the vehicles this year – up by almost 50% from last year – over 40% of them are actually cutting their electric fleets or not putting any more money in as the range they can achieve is less than that of a diesel van. Range anxiety and concerns over poor charging network infrastructure continue…

Sunak has hopes for spending, mortgage lending hits new highs and the super-rich return to London…

 Cash ‘set to supercharge UK recovery’ (The Times, Philip Aldrick) shows that Rishi Sunak is hoping that households and businesses who have managed to save money under lockdown will unleash spending to power the UK’s economic recovery. * SO WHAT? * Economists have been upgrading UK GDP growth forecasts of late and sentiment across the board has been strong – in fact, I’d say that there is a real downside risk here if there proves to be a shortfall in execution as expectations really are universally very high at the moment.

Still, UK mortgage lending jumps to record high in March (Financial Times, Valentina Romei) shows that UK mortgage lending shot up by the highest amount ever on a monthly basis as buyers rushed to beat the stamp duty holiday deadline, according to the latest data from the Bank of England. Super-rich return to central London as mortgage lending reaches record high (Daily Telegraph, Melissa Lawford) shows that deals in London’s most expensive borough, Kensington and Chelsea, shot up by 80% in the two weeks following the latest lockdown lifting – which would suggest that the pep is firmly back in London’s step! * SO WHAT? * The March deadline was particularly frenetic but the subsequent deadlines of the end of June and the end of September are also likely to be pretty busy – it’s what happens once we hit the final deadline that will be interesting!

Lockdown preparations are made, Match anticipates more matches and synthetic diamonds could follow…

As we all prepare for further steps towards normality, Goldman’s London bankers prepare for office return (Daily Telegraph, Lucy Burton) highlights a major milestone as it is the first major bank to tell its staff to get back to the office by June 21st. I suspect that rivals will be keen to follow suit in order not to look lazy in comparison 😂. Then in Odeon screens set to reopen on May 17 with Bond film (Daily Telegraph) we see that the cinema chain is set to open most of its UK screens on May 17th with No Time To Die and Peter Rabbit 2: The Runaway set to bring in the punters once more. Drinkers to prop up the bar from next month (Daily Telegraph, Hannah Boland) shows that the likes of JD Wetherspoon, Greene King, Stonegate (which owns Slug & Lettuce) and Young’s are preparing for a return of bar service from June 21st and Match predicts ‘summer of love’ as dating restrictions ease (Financial Times, Mamta Badkar) shows that the owner of apps including Tinder and Hinge reckons that the easing of social restrictions will lead to a boom in romance/horniness. Well at least there will be more places to go on a date!

Then in Pandora jewellery brand says it will stop selling mined diamonds (The Guardian, Zoe Wood) we see that the Danish jewellery manufacturer has announced that it will be the first big player to switch to lab-grown stones. These diamonds can be produced at a third of the cost and will clearly not be as harmful to the environment. Synthetic diamonds/Pandora: the ultimate high-pressure sale (Financial Times, Lex) points out that synthetic diamonds only currently make up about 6% of the rough diamond market but consultancy Bain reckons the demand will grow at double the pace of that of mined diamonds. * SO WHAT? * If these things catch on, they could be to mined diamonds what meat substitutes are to burgers and sausages. I wonder whether we’ll see lawsuits in future from the likes of De Beer arguing that they can’t be called diamonds but “translucent polygons” 😂!

…in other news…

The dust hasn’t even settled on the news that Bill and Melinda Gates are getting divorced but people are queueing up to offer solace in People are sliding into Bill Gates’ DMs after he announced his divorce from Melinda Gates (The Mirror, Emma Rosemurgey). I wonder what it is about the multi-billionaire pensioner that they find so appealing…