Wednesday 11/03/20

  1. In MACRO, CORONAVIRUS & OIL NEWS, Putin enshrines his own power, the UK Budget goes for growth, the Bank of England makes a deep interest rate cut and we see more losers from the coronavirus while the oil shock endangers renewables
  2. In RETAIL NEWS, Ikea teams up with Alibaba and DFS announces a drop in sales
  3. In INDIVIDUAL COMPANY NEWS, events organiser Informa cancels, Tesla aims for another US gigafactory and ambition increases for meat alternatives
  4. In OTHER NEWS, I bring you (possibly) the world’s thinnest sandwich…



So Putin consolidates his power, Sunak aims for a growth Budget, the Bank of England cuts interest rates and we learn from returning Chinese workers as more coronavirus losers emerge while the oil shock threatens renewables…

Vladimir Putin sets stage for retaining his grip on power (Financial Times, Max Seddon) highlights the Russian president’s latest efforts to ensure his power lives on by backing constitutional changes that could allow him to stay in office until at least 2036. * SO WHAT? * The current constitution, which was came into force in 1993, restricts presidents from serving more than two consecutive terms. However, Putin has managed to bend and fudge the rules over the years to hang on to power. What he is proposing would let him stay in power until he is 83 (which would make him longer-serving than Joseph Stalin and older than Leonid Brezhnev) but then forbid any successor for holding more than two six-year terms 😱! Nothing like making up your own rules! His current term is due to expire in 2024 – but I wouldn’t bet on him stepping down 😂. You do wonder, though, how Putin is going to get through the current oil war as I would have thought that Saudi Arabia is better-placed to weather the lower prices for longer…

Rishi Sunak to signal end of austerity with huge leap in borrowing (Financial Times, Chris Giles and George Parker) trails what the Budget announcement will bring later on today when it is officially announced. Chancellor Rishi Sunak is to unveil the biggest hike in public borrowing for 30 years in his first ever Budget and spend the money on short term fixes to help the NHS, companies and individuals tackle the coronavirus. He will also be looking to invest in infrastructure projects over the next five years and will announce a review of the UK’s economic framework. Sunak will also be expected to come good on manifesto promises, like cutting national insurance contributions and investing more of the government’s money. It’ll be interesting to see the detail later.

*** NEWS JUST IN *** Coronavirus latest: Bank of England cuts interest rates to 0.25% (Financial Times, Alice Woodhouse) heralds an unscheduled cut in the UK interest rate by 50 basis points to 0.25% (it was 0.75%). This is a big cut, but the Bank’s Monetary Policy Committee agreed unanimously to the move. This will be its lowest level since the 2016 Brexit referendum and follows the 50 basis point cut announced by the Fed last week.

In coronavirus news, Chinese companies get back to work – but with stricter rules (Financial Times, Ryan McMorrow and Qianer Liu) shows that Chinese companies are starting a phased return to the office, but are adopting new strategies to try and avoid a resurgence of the coronavirus outbreak. Most companies are allowing only half of their

employees back and they are subject to having their temperatures taken multiple times, having to wear facemasks all day and are being discouraged from using public transport. Employees are instructed not to stand too close to each other, office seating is in square metre grids to keep them separate and food is delivered to their desks to ensure they eat alone 😥. Food delivery giant Meituan has even started to provide “contactless shields” to employees to prevent the virus spreading while they eat (it makes it look like you are eating in some kind of box) and staff have to fill in a daily health questionnaire on an app that asks about their travel history, health and mood. You have to show the app result to security guards and take a temperature test in order to leave the building. One poor bloke mistakenly said he had symptoms and the next morning he got a phone call from HR asking if he still had symptoms – so he redid the survey. On the flip side, one guy from Baidu said that “I can sleep in until 9am or 10am every day – it’s amazing. I don’t need to change clothes or crowd on to a bus”. So that’s at least one worker who is enjoying sitting around in his pants all day. Will this be coming to the UK I wonder?? I would be surprised if British workers will be quite so compliant.

Airlines slash flights to cut costs as coronavirus hits travel demand (Financial Times) highlights ongoing troubles for airlines as American Airlines, Delta Airlines and United Airlines have all delayed publication of their financial forecasts, Qantas, Norwegian Air Shuttle, Korean Air, Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines are among the many who have cancelled flights and are in varying degrees of financial precariousness. Wedding’s off: the less obvious victims of coronavirus (Financial Times, Katharine Gemmell) looks at how the outbreak has basically closed down the UK’s wedding insurance market as John Lewis and Debenhams have withdrawn cover while Asian Wedding Insurance, Dreamsaver Wedding Insurance, Emerald Life Insurance, Wedding Plan and the National Wedding Show have all temporarily suspended applications for cover that generally tends to compensate for loss or damage due to unforeseen circumstances like fire damage to the wedding dress of loss of rings as well as unavoidable cancellations. On a slightly positive note, UK lenders provide relief to customers hit by coronavirus (Financial Times, Myles McCormick) highlights that UK banks including the Royal Bank of Scotland, Lloyds Banking Group, Barclays and TSB are announcing various measures – like mortgage holidays and fee-free refinancing – to ease the potential pain of borrowers.

With regard to current oil shenanigans, Oil shock threatens to sap wind out of sails for renewables shift (Financial Times, Leslie Hook) shows that the recent plunge in the oil price is likely to lessen any recent urgency for renewables as the traditional black stuff is getting cheaper. It may also dampen demand for electric vehicles in the short term at least. On the other hand, it may make investors like oil companies even less because of short-term volatility whereas renewables may offer more stability on a longer-term basis.



Ikea teams up with Alibaba and DFS announces weaker sales…

Ikea launches virtual store on Alibaba to lure Chinese customers (Financial Times, Richard Milne) heralds a big moment for the world’s biggest furniture retailer as it announced the launch of a virtual store with Alibaba in order to reach more Chinese customers. Ikea products are sometimes available on third-party websites – but not directly from them. Execs vetoed using Amazon but found selling product via an external website more problematic than they had originally thought. Ikea will be selling its wares via Tmall, Alibaba’s consumer platform, to

customers in Shanghai, Jiangsu, Zhejiang and Anhui initially, rolling out to other cities later. * SO WHAT? * This is all part of Ikea’s massive business model overhaul – and it is continuing to open smaller city-centre stores whilst also looking into other initiatives like becoming a broader online furniture retailer (i.e. to become the Asos of furniture) and renting out furniture via subscription.

High street stalwart DFS Furniture unveils slump in sales (Daily Telegraph) is an altogether less exciting development for DFS as it announced yesterday a 5.7% drop in group revenues for the first six months of the year. It said, unsurprisingly, that the trading backdrop was “challenging”, that consumer confidence was still fragile and that it expected lower footfall as customers avoided the high street. Not great.



Informa cancels events, Tesla scopes out a new gigafactory site and meat alternatives get more ambitious…

Informa postpones global events worth £400million (The Times, Simon Duke) highlights more coronavirus casualties as the events organising company, which puts on over 500 events per year, has decided to postpone 115 events until later on in the year. It has also cancelled 13 other exhibitions worth £25m in sales but hopes to put them on next year instead. * SO WHAT? * Given that exhibitions bring in about 65% of revenues, this is clearly a big deal – but I guess there’s nothing else it can do. Informa’s chief exec Lord Carter believes that pent-up demand and a realisation that conferences are actually quite valuable will power revenues once the coronavirus outbreak calms down. I would say that there is a danger that it could go the opposite way if people start to think that they are a waste of time!

Elon Musk says incentives, costs will influence site of new US Tesla factory (Wall Street Journal, Tim Higgins) shows that Tesla is on the lookout for a new location for its next assembly facility. Tesla’s founder was open about the fact that incentives could play a role in the decision. He indicated that the site should be somewhere in the middle of the US and that it would be building the new Model Y as well as its new pickup truck. The company continues to target at least a 36% increase in deliveries this year and is due to announce first quarter delivery figures early next month.

Then in Alternative meat industry moves beyond the burger (Financial Times, Emiko Terazono) we see that companies are now looking beyond making “meat” patties and “sausages” in order to make meatless alternatives with texure akin to real “cuts” of steak and chicken breast. Novameat is a company that is trying to replicate the look and sensation of meat, which is more difficult to do for a cut than it is for a minced product. Other companies with the same aim include UK start-up This. Carnivores will prefer the travails of Memphis Meats and Future Meat Technologies, who both “grow” meat from cells. There really are some interesting developments afoot!



And finally, in other news…

Given all the coronavirus gloom out there, I thought that maybe you could use a few moments of distraction and admire the skill of the bloke in Japanese knife pro makes world’s allegedly thinnest sandwich (SoraNews24, Eli Pang Impressive! Mind you, you wouldn’t want him to make your packed lunch (unless you were on a diet of course) 😂

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Some of today’s market, commodity & currency moves (as at 0745hrs 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 **
5,960 (-0.09%)8,34410,475 (-1.41%)4,660 (-1.03%)19,416 (-2.27%)2,969 (-0.94%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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