Wednesday 08/09/21

  1. In MACRO & CRYPTO NEWS, Germany and Norway elections get closer, Sunak sets the date for the Budget, tax on dividends rises and El Salvador’s bitcoin launch stutters
  2. In SUPPLY CHAIN NEWS, Ikea sees furniture shortages and Iceland says the lack of truckers will continue but there could be signs of bottlenecks easing in China and Germany and Intel announces European chip manufacturing plans
  3. In CONSUMER/RETAIL NEWS, UK house prices rise, Ted Baker recovers and John Lewis tries another new thing
  4. In MISCELLANEOUS NEWS, Toyota announces battery production plans and Deutsche Telekom does a deal with SoftBank
  5. AND FINALLY, I bring you a record-breaking cat..



Elections for Germany and Norway approach, Sunak sets a date, dividend tax rises prompt uproar and El Salvador’s bitcoin debut is embarrassing…

Elections for Germany and Norway are fast approaching and as things stand at the moment, Angela Merkel implores Germans to pick Armin Laschet as her successor (Financial Times, Guy Chazan) highlights an unusual intervention by Merkel in what could have been her last speech in the Bundestag where she really pushed Armin Laschet as her replacement in the forthcoming elections and warned of the dangers of a leftwing German government. She said that voters would have to choose between a coalition comprising of the Social Democrats, Greens and hard-left Linke Party and a more moderate government led by Armin Laschet, the centre-right CDU/CSU candidate. * SO WHAT? * Merkel, who continues to have high approval ratings, has stayed out of the campaign melee until now but has become more involved in the last few days as her party is looking rather iffy on the polls. At the moment, SPD candidate Olaf Scholz looks like the front-runner to win but Merkel is playing on their potential willingness to get into bed with Die Linke, a party that is pro-Russia and wants to disband the NATO military alliance.

In Norway’s oil rises to top of election agenda as climate fears grow (Financial Times, Richard Milne) we see that some fundamental issues are being discussed as the country heads to a parliamentary election next week. On the one hand, you have a country that is seen as being a major environmental cheerleader with EVs and carbon capture storage – and then on the other, it is Europe’s biggest petroleum producer with a humungous great sovereign wealth fund that was built on oil and gas revenues! Support for the Green party – which says that it will only join a government that commits to an immediate cessation of oil and gas exploration – is rising, as is support for other pro-environment parties the Socialist Left and Liberals. However, Norway’s two biggest parties – Labour and Conservatives – are firmly behind the oil industry which provides about 6% of Norway’s jobs. The Conservatives, led by Erna Solberg, are currently in power and are keen on using the money generated by the oil industry to finance a transition to greener forms of energy rather than just cutting it off suddenly. Labour is also behind the oil industry but argues that the transition to greener energy is too slow at the moment. It’ll be interesting to see how this turns out…

Back in the UK, City of London faces fresh threat from £600m dividend raid (Daily Telegraph, Russell Lynch) highlights an increase in tax on dividends as part of efforts to pay for the NHS and social care. The tax on dividend income will increase from 7.5% to 8.75% in April 2022. Critics say that this targets wealth creators and business owners who pay themselves in dividends. Some also think

that the change will make it more likely for companies to list outside the UK. Johnson plan to fund health and care lifts UK tax burden to 70-year high (Financial Times, George Parker, Laura Hughes and Chris Giles) is among the massive slew of articles in today’s newspapers that highlights increases in national insurance payments for both employers and employees. * SO WHAT? * Whatever BoJo would have done will have angered someone. The fact is that national debt is about 100% of GDP due to the massive amounts we borrowed to get us through the Covid crisis. Crudely speaking, lefties will say “tax the rich” and that the burden falls hardest on those least equipped to pay while right wingers will say that this punishes those who create the wealth that will dig us out of the current debt hole. FWIW, I see this as a knee-jerk reaction to an unpopular, yet necessary, move to do something about the country’s finances but that employees and companies will just get on with it once the fuss has died down. I have to say that it is pretty amazing to see the government’s recent moves on tax – raising the tax burden is something that you would have expected under a Labour government, not a Conservative one! I wonder whether all of this makes Labour leader Kier Starmer’s job more difficult as it will arguably be harder for him to differentiate his party’s policies with the Conservatives without getting really extreme. The traditional Labour = tax and spend and Conservative = cut taxes, encourage businesses seems to be much more blurred right now. Just sticking with national finance matters for the moment, Rishi Sunak confirms autumn budget to take place on 27 October (The Guardian, Phillip Inman) says that the date for the next Budget has been confirmed as being 27th October. 

Meanwhile, El Salvador’s bitcoin debut stumbles over tech problems (Financial Times, Christine Murray) highlights a tricky start for the financially impoverished Central American country’s bid to launch bitcoin as legal tender yesterday as the government had to take its digital wallet app for storing the cryptocurrency offline due to server problems. The app gave Salvadoran citizens $30 of free bitcoin and came back online after a few hours. The price of bitcoin also crashed just one day after the nation spent millions to buy 400 bitcoins (although it then bought 150 more, bringing its total to 550). * SO WHAT? * El Salvador is the first country in the world to make bitcoin legal tender – and while the international community has condemned this move, there is no doubt that everyone will be watching how things unfold with great interest – a bit like watching a horror film while you are covering your eyes but sneaking a peak through your fingers😁. President Nayib Bukele says that he made this move to bring investment to El Salvador and to help improve access to its financial services. Under the new law, all businesses have to accept bitcoin as payment for goods and services although citizens can still use the US$, which has been the national currency since 2001. Critics say that the bitcoin move is just a way of distracting attention away from a failing economy and that it will do zip about improving the situation. Everyone will be watching how things go here, especially regarding how widely adopted bitcoin will really be among ordinary citizens.



Furniture shortages hit and Iceland says the driver shortage will continue but then China and Germany point to a glimmer of hope and Intel outlines semiconductor production plans…

I know I keep banging on about supply chains – but the fact is that problems are getting worse and I’m trying to keep you abreast of any developments given the major ramifications 👍. Supply chain squeeze: first cars, now chairs and cupboards (Financial Times, Valentina Romei, Martin Arnold and Davide Ghiglione) does a really good job of charting the story-until-now about supply chain shortages, saying that the latest area of the economy to suffer is the furniture sector as even giants like Ikea are feeling the impact. The company says that it “cannot predict” when supplies will reach normal levels and that current challenges will continue due to a “perfect storm of issues”. A recent survey by the European Commission showed that a record one in three EU furniture makers said

that they’d experienced supply problems. Meanwhile Iceland warns trucker shortage will last into 2022 (Financial Times, Jonathan Eley) is yet another retailer bemoaning the lack of drivers.

On a slightly more positive note, China and Germany raise hopes of an end to supply chain snags (The Times, Philip Aldrick) says that exports from China increased by 25.6% year-on-year in August (pretty good versus the 19.3% in July and comfortably above market forecasts) and German industrial output increased by 1% month-on-month in July. * SO WHAT? * Some observers will interpret these latest figures as a sign that both countries are now past their worst point and are back on the growth track.

Then there’s some potential good news for the car industry in Intel to invest up to $95billion in European chip-making amid US expansion (Wall Street Journal, Asa Fitch and William Boston) as the chip maker outlined plans to expand in Europe to meet demand. The company is already intending to build two European plants, but left the door open to build more. * SO WHAT? * Demand doesn’t look like slowing down any time soon, but building these things doesn’t take place overnight. Still, it’s a step in the right direction!



UK house prices rise, Ted Baker recovers and John Lewis tries another new thing…

UK house prices hit record high despite cut in stamp duty break (The Guardian, Julia Kollewe) cites the latest data from the Halifax, which says that the average house price shot up to record levels in August, echoing last week’s data release by rival Nationwide. Interestingly, the annual rate of house price growth slowed down to 7.1%, which is the lowest rate since March, but prices are still comfortably higher than they were last year. This means that most homeowners will be feeling quite smug at the moment as they have made money on paper – and this may lead to more confidence, which leads to more consumer spending which leads to more economic growth.

On the retailer side of things, Lifting of restrictions removes the shackles from Ted Baker (The Times) shows that the beleaguered apparel retailer is exhibiting signs of recovery as it unveiled a positive trading update yesterday, saying that both offline and online sales were rising and that its North American business was rebounding. Overall sales were up by a decidedly chunky 50% from the previous year. Ted Baker: casual fashion casualty must loosen up to step up (Financial Times, Lex) brings attention to its

ongoing financial and managerial recovery under chief executive Rachel Osborne after a period of scandal and uncertainty. Will its turnaround continue to gather momentum? It looks like it at the moment, but it may have to soften its exposure to more formal clothing in order to do so as casual trends continue.

Then in John Lewis to launch new fast fashion range (Daily Telegraph, Hannah Boland) we see that the struggling retailer is trying yet another new avenue by unveiling plans to launch a fast fashion range to rival the likes of Asos and Boohoo. The new clothing range will be an expansion of its existing Anyday line of affordable homeware and tech. * SO WHAT? * Good Lord! Does this look like firefighting or what?!? It just seems to me like Dame Sharon White seems to be latching onto any trend she can, painting it as an important evolution whilst at the same time doing b*gger all with the main offering! Tinkering at the fringes of the institution is not the answer IMO. I think she needs to gather all these new initiatives together and announce them as part of a broad and coherent strategy. It just seems to me that she is announcing various random initiatives at various times with no apparent direction. I really would have thought that she’d get much better buy-in if she took a more co-ordinated approach. It’s great she’s trying to do new things, but they need to be part of a more recognisable movement.



Toyota commits to batteries and Deutsche Telekom does a deal…

In other big stories today, Toyota to spend $9billion on electric-car battery plants (Wall Street Journal, Sean McLain) shows that the car company is going to commit a large sum over the next ten years to build EV battery factories as part of plans to sell up to two million electric cars over that time period. * SO WHAT? * This is an interesting move as the world’s biggest car maker by sales had previously said that it didn’t think battery-powered cars were a good solution because they were too expensive to make and took too long to charge. Its preference has been for hybrid electric vehicles. I guess there’s still time to evolve, but this course of action seems to be the thing to do these days as the likes of GM, Ford and VW are all going the same way.

Elsewhere, Deutsche Telekom deepens bet on US market with SoftBank deal (Financial Times, Arash Massoudi and Kaye Wiggins) highlights a deal with Japan’s SoftBank that will give Deutsche Telekom a boost in the US market. SoftBank will take a 4.5% stake in Deutsche Telekom, making it the company’s third biggest shareholder after the German government and BlackRock, and it will get one of its senior execs on the board. It has agreed not to sell shares until at least December 2024. In return, DT will buy 45m shares in T-Mobile US that are currently owned by SoftBank. SoftBank/Deutsche Telekom: legacy telcos bolster buyback hopes (Financial Times, Lex) says that this share swap deal on its own is nothing to rejoice about particularly but that the real thing it needs to worry about is how to get growth outside its stake in Alibaba, which accounts for about 40% of its equity value still!



…in other news…

I thought that I’d leave you today with the record-breaking cat in Japanese Scottish Fold Motimaru grabs Guinness World Record for most watched cat on YouTube (SoraNews24, Master Blaster). That is some accolade!!!

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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 **
7,124 (-0.88%)35,100 (-0.76%)4,520.03 (-0.34%)15,374.33 (+0.07%)15,825 (-0.67%)6,709 (-0.51%)30,181 (+0.89%)3,675 (-0.05%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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