Wednesday 11/09/19

  1. In MACRO NEWS, Spain faces yet another election while UK jobs and pay increase
  2. In MANUFACTURING NEWS, EDF faces a nuclear problem and VW and Land Rover unveil important new models
  3. In TECH NEWS, Vestager gets a second term, Jack Ma steps down from Alibaba, Apple takes on Netflix and Uber cuts 400 tecchies
  4. In UK HIGH STREET NEWS, we see record closures, JD Sports rides the athleisure wave and Honest Burger defies the odds
  5. In OTHER NEWS, I bring you a Great British Bake-Off classic…



So Spain faces the polls again while UK wages and job numbers increase…

Spain faces fourth election in 4 years after talks fail (Financial Times, Daniel Dombey) shows that Spain is now heading towards yet another election after talks between its Socialist government and the extreme left-wing Podemos party broke down yesterday. Caretaker PM Pedro Sanchez had been trying to cobble something together to avoid this state of affairs, but it seems that the parties are too far apart on issues such as fiscal policy and Catalan independence. There will be an election on November 10th unless he can win a parliamentary vote on forming a new government by September 23rd. The Socialists nabbed 29% of the vote in Spain’s most recent election to Podemos’ 14% and some opinion polls indicate that the Socialists would improve their share while Podemos would lose share. * SO WHAT? * Spain has had three elections

since December 2015 as the old two-party system has changed to a coalition-based government which has subsequently led to instability. Yet despite this, the economy is actually doing quite well!

Pay growth at 11-year high as jobs total rises (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that pay growth increased by 4% – for the first time in over 11 years – due to higher base pay and bonuses. The number of jobs also increased in the three months to July, meaning that the unemployment rate of 3.8% is now at its lowest level for 45 years!!! * SO WHAT? * If you couple that with another recent release from the ONS which shows an increase in economic output, things don’t actually look too bad at the moment. Having said that, some economists are concerned that there are signs of the rate of employment slowing down – so everyone will be following subsequent data very closely. In the meantime, it looks like consumers are going to have enough money to get them through these uncertain times – especially if they get another boost from PPI payments!



EDF has a nuclear-shaped problem, the global car industry continues its downward spiral and both VW and Land Rover unveil key vehicles…

EDF nuclear blow sparks share price meltdown (Financial Times, David Keohane) highlights welding problems at some of its nuclear plants which sparked a 7% share price fall yesterday as investors reacted to the news. This was its sharpest one-day drop in almost two years and it could get worse if it has to shut down its 58 nuclear power stations. The problems relate to components made by its majority-owned nuclear reactor construction unit Framatome. * SO WHAT? * EDF, which is 85% owned by the French government, is in a tricky position at the moment. President Macron, who faces re-election in 2022, is keen to show progress towards the target of cutting the percentage of nuclear-generated electricity in France from 72% currently to 50% by 2035 and has been putting pressure on the company to restructure. EDF is currently in the middle of a €45bn investment programme to extend the life of its existing plants and grow its renewables capability as part of this push whilst coping with €37.4bn of net debt (or double that if you include hybrid debt as well as pension and nuclear liabilities). There is talk that the nuclear and hydroelectric business could be separated into an entity called EDF Bleu, leaving the renewable energy, networks and services business into another entity called EDF Vert. Under this plan, EDF Bleu would be wholly state-owned

while EDF Vert could be listed and sell 20-40% of itself to raise funds. A delicate path would have to be trodden here as EU regulators won’t want to see too much intervention by the state and militant union leaders will obviously want to preserve jobs, but it may a good solution for investors who want exposure to EDF itself without the nuclear liabilities (plus the attractive growth prospects for the renewables business). So as you can see, the latest news of dodgy welding could throw more than a spanner in the works for EDF if it has to lose even more money to solve the current issues…

In the world of car manufacturing, we see some interesting announcements at the Frankfurt Motor Show yesterday in VW leads charge in race to electrify market (The Times, Robert Lea) where VW unveiled its first ever purpose-built electric vehicle, the ID.3 to great fanfare. Taking government subsidies into account, an ID.3 can be yours for less than £25,000, pitting it against the likes of the BMWi3, the Nissan Leaf and Mini Electric. Yesterday also saw the unveiling of the electric version of the Vauxhall Corsa, the Corsa-e, at a similar price point. A Defender, but not as we know it (The Times, Robert Lea) heralds the announcement yesterday of a new old favourite – the Land Rover Defender. The entry price point of £40,000 is somewhat higher than that of its previous incarnation at £23,000 but it looks more up-to-date and has more gizmos on it. * SO WHAT? * This is all very well, but the fact remains that car sales are continuing to decline and although electric cars look the part, charging infrastructure continues to be rather sparse. The situation of the latter must be improved as a matter of urgency if EVs are to stand a fighting chance of wider adoption.



Vestager gets a second term, Jack Ma retires, Apple takes on Netflix and Uber cuts technical staff…

Big tech companies must be collectively groaning as Vestager handed second term with more powers (The Times, Simon Duke) shows that the European Competition Commissioner, Margrethe Vestager, has been handed an unprecedented second term of five years with enhanced powers to develop digital policy across the EU. Vestager is the one who slapped Google with a multibillion-dollar fine for abusing its power in internet searches and made Apple pay the Irish government €14bn in back taxes. Her role will now include the oversight of emerging policies on cybersecurity, AI and privacy in addition to shaping the EU’s stance on tax avoidance by multinational tech companies.

Then Jack Ma, China’s richest man, steps down as chairman of Alibaba (The Guardian, Lily Kuo) marks a historic day for the Chinese e-commerce giant as its founder hands over the reins to his successor, Daniel Zhang, 20 years after he started the company. Since its beginnings among a group of friends in a shared appartment in Hangzhou in 1999, the company has expanded its business from selling goods online to having significant presence in financial services, mobile payments and AI. Alibaba listed on the New York Stock Exchange in 2014 in what is the largest IPO in history, where the company was valued at $460bn. He will retain a 6.22% shareholding in the company and remain on its board of directors until its AGM in 2020.

Apple undercuts rivals with streaming price (Wall Street Journal, Tripp Mickle) highlights the launch of three new iPhones yesterday (the iPhone 11, iPhone 11 Pro and 11 Pro Max), a new smartwatch with a better battery and its new TV+ video streaming service, which undercuts Netflix on price and which will debut on November 1st in 100 countries including the UK. Sales of the iPhone accounted for less than 50% of Apple’s overall revenues this summer for the first time since 2012 as the company continues its efforts to beef-up revenues from its services segment. * SO WHAT? * Given that the new line-up doesn’t have 5G capability (or fold 😂) I would expect iPhone owners from the last two-ish years to wait longer to upgrade, but the offer of free TV+ for a year for those buying a new iPhone, iPad or Mac will potentially boost device sales. Incremental improvements (apart from the TV thing, which is a new direction), but otherwise fairly meh from what I can see – and I like Apple products!

Uber cuts more than 400 technical jobs (Wall Street Journal, Heather Somerville and Mark Maurer) shows that the troubled ride-hailer is cutting about 8% of its headcount in product and engineering divisions, mainly in the US, as it strives to become profitable. * SO WHAT? * Uber has over 27,000 full-time employees worldwide but it seems that this may be slowing down. It laid off a third of its marketing department in July and announced its biggest ever quarterly loss last month, citing tough competition, costs related to its IPO and slowing growth in its rides business. Uber shares are currently trading at about 26% below the company’s May flotation price.



UK store closures hit new highs while JD Sports and Honest Burger put in impressive performances…

High street store closures at record levels (Daily Telegraph, Laura Onita) cites a report from PwC and the Local Data Company which show the highest rate of store closures on the UK high street in nine years. Fashion

retailers, pubs, bars and restaurants suffered the most, but then ‘Vibrant’ JD Sports outpaces competition (The Times, Ashley Armstrong) shows that it’s still possible to win in the “athleisure” market, despite what competitor Mike Ashley at Sports Direct might be saying and Honest Burger defies downturn in casual dining with £31m sales (Daily Telegraph, Oliver Gill) shows it’s still possible to turn a profit in burgers despite the experiences of Gourmet Burger Kitchen and Byron Burger in the last couple of years.



And finally, in other news…

I just couldn’t find an amusing or informative news story that got me interested today, so I thought I’d leave you with this amusing Great British Bake-Off effort as I was reminded of it last night: Yes, it’s the “old” presenters when it was on the BBC, but it’s a classic…

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Some of today’s market, commodity & currency moves (as at 0906hrs 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 **
7,268 (+0.44%)26,909 (+0.28%)2,979 (+0.03%)8,08412,269 (+0.35%)5,593 (+0.08%)21,598 (+0.96%)3,009 (-0.41%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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