Wednesday 08/01/20

  1. In MACRO NEWS, Iran retaliates, the Venezuela drama continues, Sanchez becomes Spain’s PM and European inflation rises
  2. In CAR NEWS, Tesla talks China expansion, GM has its worst China sales decline, Rolls-Royce benefits from its SUV and Aston Martin announces a profit warning
  3. In RETAIL NEWS, high street job losses increase, supermarkets have a tricky Christmas but Majestic toasts a good one
  4. In TECH NEWS, Sonos sues Google and Samsung pins hopes on 5G
  5. In OTHER NEWS, I introduce to you TGI Friday’s vegan “steak”



So Iran retaliates, Venezuelan chaos continues, Sanchez becomes PM and European inflation rises on higher energy bills…

In Iran fires missiles at US forces in Iraq (Wall Street Journal, Gordon Lubold, Nancy A.Youssef and Isabel Coles) we see that Iran fired missiles at two US bases in Iraq, which Iran’s Islamic Revolutionary Guard said were in retaliation for the assassination of Major General Qassem Soleimani. An admin official says that there weren’t any casualties, but conceded that it was “early”. Iran’s Foreign Minister Javad Zarif tweeted, “We do not seek escalation or war, but will defend ourselves against any aggression”. * SO WHAT? * It was bound to happen, but this attack was unusual in that the missiles were not only fired into Iraq from Iranian territory, Iran openly acknowledged that it had happened as well (whereas in the past, they would generally try to deny it and blame others). The US has upped its military presence in the region and now the total number of soldiers, sailors and airmen in the Middle East stands at around 80,000. There will be more to come…

Following on from some stories earlier this week, Venezuela: What happens next? (Financial Times, Gideon Long) shows continuing chaos in the country as Juan Guaidó claims to be its legitimate president and president of the National Assembly while Nicolas Maduro and his mate Luis Eduardo Parra are actually in the respective hot seats. * SO WHAT? * Confusion continues to reign as the US, EU, Organization of American States and the Group of Lima (a group comprising of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico,

Panama, Paraguay, and Peru. Guyana, Saint Lucia and Bolivia) support Guaido and condemn the Maduro administration, although Russia supported Parra’s highly contentious election. The drama continues…

Then in Spain’s parliament confirms Pedro Sánchez as Prime Minister in tight vote (Financial Times, Daniel Dombey) we see that parliament confirmed him as Prime Minister (he has been the “caretaker” prime minister until now) by 167 votes to 165! What a ringing endorsement 😂! Spain will now have its first coalition government in modern times. The new administration will have its first Communist ministers in government since the 1936-39 civil war and plans to impose major tax hikes on big corporations, reduce carbon emissions and fight gender-based violence. * SO WHAT? * This is a ridiculous state of affairs. Pedro Sánchez came to power 18 months ago only by winning a vote of no-confidence in the previous administration and since then has failed miserably in putting together a proper government! Even though he “won”, this sounds like the recipe for an absolute disaster. Ironically, Spain’s economy has actually been doing OK in the meantime, but having a horrendous hodge-podge of politicians at the top who are idealogically opposed to each other will surely have consequences.

Energy bills push eurozone inflation to eight-month high (Daily Telegraph, Tom Rees) cites the latest figures from Eurostat that show a rise in inflation from 1% to 1.3% in December, equaling the biggest jump for 19 months, as higher energy prices (which could still climb higher following US-Iran tensions) started to bite. * SO WHAT? * Eurozone inflation has stuck below the ECB’s 2% targets, with ultra-low interest rates failing to kick-start sluggish European economies. The ECB will be conducting a policy review this year to see what it can do to jolt the ‘zone back to life.



Tesla outlines intentions for China, GM disappoints, Rolls-Royce benefits from SUV sales and Aston Martin has a profit warning…

Tesla set to expand China assembly with company SUV (Wall Street Journal, Yin Yijun, Yoko Kubota and Tim Higgins) shows that Tesla has begun to tool up its new Shanghai factory to churn out its next model – the Model Y, a compact SUV – just as it started delivery of Model 3s to its Chinese customers. Tesla’s Chinese website said that Model Y SUVs could potentially roll off production lines in 2021. * SO WHAT? * This is an impressive achievement given that the Shanghai site was just a sea of mud only a year ago! Mind you, it is obviously keen to devote resources to boost production facilities in the world’s biggest car market. Tesla plans on starting production of the Model Y at its California site this year and has announced plans for its upcoming German gigafactory to make both the Model 3 and the Model Y (although it will be starting with the Model Y). Of the new model, Elon Musk said “Ultimately, Model Y will have more demand than probably all of the other cars of Tesla combined”.

Staying with China for the moment, GM posts its biggest China sales decline (Wall Street Journal, Mike Colias and Yuko Kubota) makes for grim reading for General Motors as it compounded the misery by saying that 2020 was also going to be difficult. * SO WHAT? * China has been a beacon of rare growth in recent years for car manufacturers as sales elsewhere have proved to be sluggish, but in the last couple of years China sales have weakened due to a combination of slower economic growth and shrinking subsidies from the government that

make their products more affordable. GM is China’s #2 car maker by sales (second only to VW) and is more focused than many on China, so a slowdown in sales for them is particularly painful. Given that there don’t appear to be any other growth options, I would expect GM to just try and stick it out. Chief exec Mary Barra said that the company would be bringing out a few new models this year, but we’ll just have to see whether the introduction of the Chevrolet Trailblazer (a small SUV) and Cadillac XT6 (a large SUV) tempt Chinese customers!

Going to the more “luxury” end of the market, Rolls-Royce enjoys record sales thanks to £264,000+ SUV (The Guardian, Rupert Neate) shows that the company achieved its best ever sales last year – up by 25% since 2018 as people with way more money than sense bought the Cullinan SUV (have you seen this thing? It is a monstrosity that you just can’t unsee 🤮!). Rolls-Royce Motor Cars (remember, it is separate from the Rolls-Royce that makes jet engines) said that sales in the US were strongest (I would imagine that rappers and drug dealers would like this car 😂) at about a third of shipments, with China coming into the #2 spot with about 25% of shipments.

Then in Profit warning for Aston Martin as sales slide (The Guardian, Julia Kollewe) we see Aston Martin issuing its second profit warning in 12 months after a tricky year with rising costs. The only hope for the company now is that the forthcoming DBX SUV is a roaring success, otherwise the company will be in a lot of trouble. The £158,000 SUV looks way better than that Cullinan thing, so let’s hope the company benefits. * SO WHAT? * Aston Martin’s troubles show just how dangerous it is to get swept up in the hype as its IPO has proved to be disastrous for many investors. The more it fails, the more likely it is to get taken private and some say that Canadian F1 team billionaire Lance Stroll is leading a consortium to build a stake in the business.



High street job losses increase, supermarkets talk Christmas and Majestic is full of cheer…

In a quick scoot around UK retail, High street crisis deepens as 3,150 staff lose jobs in a week (The Guardian, Sarah Butler and Zoe Wood) highlights the number of job losses this week as Mothercare and Links of London will quit the high street for good by Sunday night after both companies fell into administration before Christmas. Next up for the potential chop are fashion retailer Bonmarché, department store Beales and camera shop Jessops as all seeking advice on how to survive. Debenhams will shut the first six stores of the 19 earmarked for closure this year and rival House of Fraser is also set to close outlets as part of owner Mike Ashley’s turnaround plan.

The gloom continues in Supermarkets report poor Christmas amid Brexit worries (The Guardian, Sarah Butler) as analysts say that supermarkets had their slowest Christmas sales growth in four-to-five years.

Morrisons reported an “unusually challenging period for sales” and Kantar research analyst Fraser McKevitt, said that there had been little sign of a “Boris bounce” following the election. The Big Four – Tesco, Sainsbury’s, Asda and Morrisons – all had particularly disappointing trading periods as shoppers visited them less often, with Morrisons being the worst performer. Lidl and Aldi continue to grow sales, but it was interesting to see that Ocado did particularly well with sales up by 12.5% with a market share of 1.3%.

On the other hand, Majestic on sparkling form over Christmas (The Times, Dominic Walsh) highlights a strong Christmas performance for Majestic Wine, the company acquired by Fortress Investment Group for £95m. Champagne was a best seller while rum and brandy sales were also strong. * SO WHAT? * Although many retailers are experiencing tough times at the moment, it goes to show that there are still SOME winners out there! A strong Christmas season would have been particularly welcome given all the upheaval that Majestic Wine went through last year. The company is due to come up with a new business plan later on in the year.



Sonos sues Google and Samsung has 5G hopes…

Sonos sues Google over its wireless speaker technology (Daily Telegraph, Margi Murphy) heralds a dramatic development as Sonos is accusing Google of stealing its wireless speaker technology and undercutting its prices in a bid to take market share. It filed a lawsuit against Google in two US federal court systems yesterday, requesting unspecified damages and a nationwide ban on the sale of Google’s laptops, smartphones and home speakers from from the US International Trade Commission. The patent infringements allegedly took place when the two companies began working together in 2013 when they

were integrating Google’s voice assistant with Sonos’ speakers. I get the feeling this will take a while!

Samsung expects operating profit to plunge, pins hope on 5G (Wall Street Journal, Eun-Young Jeong) shows just how dire things are getting for the South Korean consumer electronics giant as it announced that it was expecting a 34% fall in its fourth quarter operating profit for 2019 as the global slump in semiconductor sales continue to hit home. The world’s #1 smarphone and memory-chip maker is due to report full earnings later on this month. * SO WHAT? * This is obviously a nightmare for the company, but then again it could well get a boost from the continued roll-out of 5G this year as people become more inclined to upgrade their phones (chip demand is also expected to rise as well). So far, reports of 5G have not exactly been glowing, but I am sure this will change as networks expand and usage increases.



And finally, in other news…

It’s been a bit sparse on the “alternative story” front today, but I thought I’d bring you TGI Fridays launches vegan steak for £12.99 – made from watermelon (The Mirror, Naimah Archibald, as an example of how ridiculous things can get when companies are so desperate to jump on a bandwagon they come out with something completely ridiculous! This “steak” is a couple of slices of melon with a spicy sauce, or if you read the official description, it is “fresh watermelon carefully cut into steak slices then chargrilled to create its unique steak-like texture”, for £12.99! What a pile of 💩. I’ve got nothing against veggie/vegan food (actually, I’m all for it), but I am against this kind of massive rip-off! Remember this story about M&S selling “cauliflower steaks”???

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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 **
7,576 (+0.04%)28,558 (-0.35%)3,237 (-0.22%)9,06913,235 (+0.82%)6,024 (+0.19%)23,205 (-1.57%)3,067 (-1.22%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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