Wednesday 06/04/22

  1. In BIG PICTURE NEWS, we see an “inflationary era”, Russia’s biz activity slump, the possibility of US recession, an agreement on hypersonic weapons, the consequences of China’s ailing agriculture, difficulties facing British agriculture and the spectre of Le Pen
  2. In ELECTRIC VEHICLE NEWS, GM and Honda team up for “affordable” EVs, Nio tries to spread the word of swappable batteries and Britons buy tons of EVs
  3. In TECH NEWS, Amazon signs satellite deals, Twitter offers Elon a seat and the Chinese owner of Newport Wafer Fab has a bumpy ride
  4. In INDIVIDUAL COMPANY NEWS, Uber broadens its offering and Shein gets a spectacular valuation
  5. AND FINALLY, I thought I’d bring you an 80’s song, sung by a 90’s band, with noughties actors, made in the 2010’s, watched by the people in the 2020’s…

1

BIG PICTURE NEWS

So things ain’t looking great, agriculture is facing big problems and Le Pen support is gaining momentum…

World on cusp of ‘inflationary era’ (Daily Telegraph, Tim Wallace and Louis Ashworth) cites the head of the Bank for International Settlements, Augustin Carstens, as saying that we are all going to have to get used to high rates of inflation. He added that there is an increased risk that we could enter an inflationary spiral as prices and wages push each other higher. Are you listening, Christine Lagarde?!? Or are you still Lagarde by name, laggard by nature?!?

Meanwhile, Russia suffers biggest slump in business activity since lockdown (Daily Telegraph, Tom Rees) shows that the Russian economy is on track for deep recession, according to S&P Global’s purchasing managers’ index and US facing recession ahead of next election, says Deutsche (Daily Telegraph, Tom Rees and Tim Wallace) shows that the US economist at Deutsche Bank, Matthew Luzzetti, reckons Biden will be in a pickle at the next presidential election, potentially handing Donny T the keys to the White House. * SO WHAT? * Biden has been particularly ineffectual recently (especially regarding the Russian invasion of Ukraine) and his approval ratings have been falling, so he’s got to pull his socks up to stand any chance of re-election in 2024. As things stand at the moment, he is presiding over the worst inflation for four decades and is all talk and no action regarding Russia/Ukraine (he is potentially even making it worse by just insulting Putin with nothing really to back it up). That dramatic release of emergency oil reserves last week has done pretty much **** all to the oil price (I really don’t know why he bothers – this is the second time he’s done it and the first time was also largely ineffectual). Well done Joe. Pull your finger out mate – the world needs you.

Then in Biden announces US, UK and Australia co-operation on hypersonic weapons (Financial Times, Demetri Sevastopulo, John Paul Rathbone and Nic Fildes) we see that the three countries are getting together to develop hypersonic weapons in order to ensure “a free and open Indo-Pacific” in the face of increasing agitation from China in the region. The pact will include the development of hypersonics,  counter-hypersonics and electronic warfare capabilities as well as more information sharing. * SO WHAT? * This is a really important development given that China is thought to be ahead in the technology and tensions are heightening about a potential invasion of Taiwan as it watches closely what’s happening to Russia in the wake of its invasion of Ukraine. Hypersonic weapons can travel at more than five times the speed of sound, are very difficult to intercept and have massive range.

Meanwhile, China’s zero-Covid policy risks causing agricultural crisis and food shortages (Financial Times, Sun Yu) shows that China’s adherence to its super-strict Covid policies is magnifying the effect of fertiliser, labour and seed shortages at the crucial spring planting season. According to official data, up to a third of farmers in the northeastern Jilin, Liaoning and Heilongjiang provinces just don’t have enough agricultural inputs because authorities have closed down entire villages to deal with the pandemic. This is pretty serious when you consider that the three provinces above make over 20% of China’s grain 😱. If it suffers a shortfall as a result of lockdowns, China will have to import more, putting even more upward pressure on prices. Mind you, China food: lockdown-induced shortages boost prospects of GMOs (Financial Times, Lex) highlights another potential solution – the use of Genetically Modified Organisms, which have been pretty controversial in China and the rest of the world…until  now. The use of GMOs will increase yields so it is likely that they will come into use with the likes of companies like Beijing Dabeinong Technology and Yuan Longping High-Tech Agriculture already seeing their share prices rising – but they could do even better if they can develop products to rival major GMO players like Bayer. Meanwhile, UK food industry faces risk of ‘permanent shrinkage’, MPs warn (Financial Times, Judith Evans) warns that the UK food industry could shrink permanently if ministers don’t do anything about Brexit-induced labour shortages that have already resulted in pig culling and crops rotting in fields. Meat processing and fruit and veg picking have suffered particularly badly from the lack of European workers since Brexit. * SO WHAT? * Supply chain problems, increased demand, harvesting and planting problems are all coming together now to push prices up even further – and it doesn’t look like this is going to change any time soon. Longer term, I suspect that countries will be even more focused on becoming increasingly self-sufficient when it comes to producing food (to reduce a repeat of the current situation), which means that there will be more demand for more fertiliser, more demand for more pickers and butchers and more price rises. Tough times.

Meanwhile, over in France, Le Pen’s poll surge rattles French bonds and bank stocks (Financial Times, Sarah White, Leila Abboud and Tommy Stubbington) shows that there’s a mini-panic going on in France at the moment as far-right challenger to Macro, Marine Le Pen, seems to be gaining ground in terms of popularity ahead of the presidential election. The fear is that Le Pen as president could cause ructions with the EU, which would scupper a fragile recovery of sorts. Generally speaking, though, Macron is expected to get a second term – but his arrogance may prove to be his downfall if he doesn’t put the effort in leading up to polling day. Just ask David Cameron how “assuming” something has proven to be a bad idea…

2

ELECTRIC VEHICLE NEWS

GM and Honda team up, Nio gets evangelical and Britons love EVs…

In more positive news, GM and Honda expand tie-up to develop millions of affordable electric vehicles (Financial Times, Steff Chávez and Peter Campbell) shows that the two carmakers are poised to jointly develop cheaper EVs for markets including North America and China. Production is set to start in 2027 using a new global production system based on GM’s Ultium battery technology. They will also try to standardise equipment to keep costs low. * SO WHAT? * We have been seeing a number of joint ventures emerge over the last few years as automotive companies try to squeeze efficiencies and reduce development costs by clubbing together. VW and Ford have a global alliance that lets Ford build EVs using VW’s plaform, for instance. I think that moves like this are interesting, as is the entry of the likes of non-carmakers Foxconn and Xiaomi in the mix to drive prices down whilst staying profitable.

Nio in talks with rivals over licensing electric car battery swap technology (Financial Times, Peter Campbell) shows that Chinese EV start-up Nio is talking to a number of other car-makers about licensing battery-swap technology to win over European motorists. Nio is targeting expansion in Europe. Instead of staying ages at a charging station for your car to get juiced up, Nio drivers go to a swap station where their car is jacked up, the battery is unscrewed from the bottom and another one put in its place. It’s way quicker than even the most powerful of chargers. * SO WHAT? * I have been a real fan of battery swapping for EVs

for some time now and although Nio is trying to persuade other makers to adopt the tech, this would probably mean that makers would have to build their own cars using Nio’s platform in order for the batteries to fit etc. I think that the idea of swappable batteries – notably criticised by Elon Musk – is brilliant and has the dual advantage of solving range anxiety and the problem of batteries degrading (at the moment, you can’t easily extract them from a car so the whole thing depreciates whereas this would not be the case if you could just swap the battery over). It could potentially help to push down initial EV prices because you wouldn’t sell the battery (you’d “subscribe” to it). Typically, batteries currently account for over a third of the cost of the entire vehicle! Will carmakers entertain the prospect, I wonder?? I think that they SHOULD!!!

Then in Britons buy more electric cars in March than in the whole of 2019 (The Guardian, Jasper Jolly and Mark Sweney) we see that the latest figures from the Society of Motor Manufacturers and Traders (SMMT) shows that EV popularity continues to rise although car sales generally are weak – March saw the lowest sales numbers for a shocking 24 years. * SO WHAT? * I think that only the well-off can afford EVs at this time because of their high prices relative to petrol equivalents. It seems that the difference between the haves and have-nots in this country have widened over the course of the pandemic – and now the war – and I really think that there is a danger that more consumers will just sit on their hands while inflation washes over them. They may well just decide to stick with what they’ve got already, wait until the dust settles and chargers become more prevalent, and THEN venture out to buy a car. Not great for the near-term though.

3

TECH NEWS

Amazon rockets, Twitter gives Elon a seat and the Chinese buyer of Newport Wafer Fab faces scrutiny…

Amazon books first rocket launches for broadband satellites project (The Guardian, Alex Hern) shows that Amazon is going to be taking on SpaceX and the UK government-owned OneWeb to put broadband-supplying satellites into space. The company has bought the largest batch of commercial launches ever to launch 3,236 satellites in its plan, dubbed Project Kuiper, to make a splash in this space. So far, SpaceX has 2,110 satellites in orbit in its Starlink broadband network while OneWeb has launched 428. Exciting, no?

Following on from all the Twitter/Musk excitement I talked about yesterday, Elon Musk to join Twitter board after taking $2.9bn stake (The Guardian, Rupert Neate) shows that Twitter has announced that Musk will be given a seat on the board of the company, with the company’s current CEO, Parag Agrawal, positively gushing. For his part, Musk said he was looking forward to the challenge and will be

aiming “to make significant improvements to Twitter in coming months”. An edit button has already been in the pipeline (Twitter was swift to make it clear that this was their idea and not Musk’s!) and will have limited release soon. Having said that, Elon Musk’s Twitter investment raises new regulatory red flag (Wall Street Journal, Dave Michaels) suggests that The Great One has picked yet another potential fight with the Securities and Exchange Commission over how he disclosed his investment in Twitter because he didn’t file his purchase on time. He really does seem to enjoy poking at the SEC

Talking about controversy, Chinese buyer of UK chip firm brushes off volatility (Daily Telegraph, James Titcomb and Gareth Corfield) highlights the travails of Shanghai-listed Wingtech, the company now infamous for buying Newport Wafer Fab via its Dutch subsidiary Nexperia. Ministers are under increasing pressure to reverse the £63m purchase due to security concerns, something that came up again after it experienced a one-day crash in trading last week. Wingtech has batted such concerns away for now and it is, or is not, currently subject to a government review depending on who you ask (the PM said that the transaction was being reviewed, but other MPs have seen no evidence of this so far).

4

INDIVIDUAL COMPANY NEWS

Uber diversifies and Shein gets a massive valuation…

In a quick scoot around other interesting stories today, Uber to allow customers to book train and plane tickets (Daily Telegraph, James Titcomb) shows that Uber is going to enable users to buy plane and train tickets via its app as it moves to broaden its offering from minicabs into other areas. Users will be able to book inter-city trains and coaches from the summer while plane and Eurostar ticket purchasing capability will be added later in the year. It also plans to enable car rental and, later on, hotel booking as part of a broader plan to transition towards a comprehensive transport booking system. * SO WHAT? * This sounds great for them (and consumers), but not so good for the likes of Trainline and other online travel players who will get a new competitor in this space.

Then in Shein worth $100bn after fundraising (The Times, Ashley Armstrong) we see that the Chinese fast-fashion retailer has just notched up a $100bn valuation at its latest fundraising. This makes it bigger than Inditex and H&M combined 😱! General Atlantic, Tiger Global Management and Sequoia Capital China were among the investors to throw money at the company in its latest financing round. Not bad for a business that was founded in 2008 as an online wedding dress seller and then overtook Amazon as the most downloaded shopping app in America last year. * SO WHAT? * Given the attractive price point of its clothes and the global tightening of individual purchasing power, you would have thought Shein would continue to go from strength to strength! What a valuation, though! If a “unicorn” is worth $1bn, a “decacorn” is worth $10bn, does this make Shein a “centicorn”?!? 👀🦄🦄🦄🦄🦄🦄🦄🦄🦄🦄 (x10).

5

...AND FINALLY...

…in other news…

There really is something in this for everyone 😁. An 80s classic, sung by a 90’s band, with actors born in the 2000’s, made in the 2010’s, watched by the people in the 2020’s. Multi-generational or what?!? I think this will really you set you up for the day!

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Some of today’s market, commodity & currency moves (as at 0756hrs 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 **
7,613.72 (+0.72%)34,641.18 (-0.8%)4,525.12 (-1.26%)14,204.17 (-2.26%)14,424.36 (-0.65%)6,645.51 (-1.28%)27,350 (-1.58%)3,283 (+0.02%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$102.320$107.25$1,919.241.305951.08877123.9161.199445,499.4

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