Wednesday 13/02/19

  1. In MACRO AND OIL NEWS, US-China talks make progress, the Baltic Dry hits new lows and Aramco looks overseas
  2. In TECH AND GAMING-RELATED NEWS, Apple has China issues and grumbling from publishers, Sony replaces its PlayStation chief and Activision Blizzard announces a restructure
  3. In CAR-RELATED NEWS, Nissan’s nightmare continues and Michelin’s shares go higher
  4. In OTHER NEWS, I alert you to a potential real estate opportunity. For more details, read on…



So US-China trade talks progress, the Baltic Dry hits new lows and Aramco looks at overseas opportunities…

China, US seek broad outline of a trade pact this week (Wall Street Journal, Lingling Wei and Bob Davis) would suggest that talks are going in a positive direction and increasing tensions were eased when Trump, in response to a question about whether he was going to stick to this week’s deadline for increasing tariffs on China to 25%, said that “If we’re close to a deal…I could see myself letting that slide for a little while”. Funnily enough, Stocks surge on US-China trade hopes (Wall Street Journal, Avantika Chilkoti and Michael Wursthorn) shows that markets got quite excited by Trump’s remarks but, let’s be honest here, this is all noise until something proper has been hammered out by Trump and Xi. Trump can be particularly unpredictable and can sometimes completely undermine his minions, so it’s too early to get even mildly excited by this IMHO.

Meanwhile, world trade is looking pretty rubbish at the moment in Baltic Dry index falls to new low as shipping sector stalls (Daily Telegraph, Tom Rees) as the closely watched global trade bellwether fell to its lowest level for two-and-a-half years on the back of slowing China growth

and fallout from the Brazilian dam disaster. The Baltic Dry Index measures shipping costs for raw materials like iron ore and coal and fell by a whopping 58% in less than two months as global trade continues to lose momentum. * SO WHAT? * US-China trade talks will be a key driver of the Baltic Dry – either way – and it rose yesterday for the first time in 17 sessions, presumably on the positive noises I referred to earlier in this section. Bank of England governor Mark Carney made dire warnings yesterday that a continued impasse between US and China could lead to an economic crunch not seen since the mid-seventies oil shock which choked off growth and sent inflation through the roof.

Then in Aramco wants to expand overseas (The Times, Emily Gosden) we see that the chairman of Saudi Aramco, the state-owned oil group and world’s biggest oil company, announced that the company has plans to build an international exploration and production business for the first time and that it would no longer be “focused on monetising the kingdom’s resources” and was eager to develop a global gas business. * SO WHAT? * So much for Crown Prince Mohammed bin Salman’s ambitions to wean the kingdom off oil revenues!!! Saudi Arabia has invested abroad in refineries and petrochemicals for years, but these remarks from Khalid al Falih, Saudi Arabia’s energy minister and Aramco chairman, are a much clearer signal of the company’s future overseas intentions.



Apple loses to Huawei and causes a kerfuffle among with publishers while Sony changes its PlayStation chief and Activision announces a restructure…

Apple loses ground to Huawei as China shipments slump 20% (Wall Street Journal, Dan Strumpf) cites the latest figures from International Data Corp which show that Apple’s smartphone shipments in China for the last quarter of 2018 fell by 20% versus the previous year in contrast to Huawei’s shipments rising by 23%, giving it a 29% market share versus Apple’s 11.5%. IDC analyst Xi Wang said that “the high price point of the iPhone X in 2017 has lengthened the replacement cycle of users, while the new models of 2018 don’t have enough innovations to make users buy” whereas Huawei’s handsets did deliver more compelling offerings with noticeably improved photography, gaming and business applications. * SO WHAT? * This just shows how much of an uphill battle Apple continues to have in China and is a rare bit of good news for the embattled Huawei (well, embattled internationally – clearly it’s doing pretty well in its own backyard!). I continue to think that Apple would be better off funneling more of its efforts into making a splash in India because I get the impression that it is flogging a dead horse in China.

In Publishers chafe at Apple’s terms for subscription news service (Wall Street Journal, Benjamin Mullin, Lukas Alpert and Tripp Mickle) we see that some news organisations are balking at Apple’s demands for 50% of the subscription revenues for a new service expected to launch later this year aiming to be a “Netflix for news”  that would allow users to have unlimited access to content from participating publishers for a monthly fee. At the moment, Apple is thinking of charging $10 per month, but this has yet to be finalised – and it could be bundled in with other new offerings like its much-anticipated TV programming and iCloud. The New York Times and Washington Post are among major titles that have NOT signed up yet – and the

Wall Street Journal is also voicing concerns over the proposed terms. Publishers will also be concerned that they will lose any access to subscriber data that they use to market directly to subscribers. * SO WHAT? * Clearly this is a work in progress for Apple, but if it is bundled well or there is some flexibility on how it splits the revenues, then a solid offering could be pretty attractive for consumers. Publishers are right, however, to be cautious as there is a big danger of cannibalising their own customer bases. However, as the saying goes, better to have a small part of something rather than own 100% of nothing!

Things really seem to be hotting up in the gaming industry at the moment. Sony’s management reshuffle means that it’s game for a dogfight (Daily Telegraph, Tom Hoggins) highlights a reshuffle at the top of Sony Interactive Entertainment as it has promoted Jim Ryan to replace John Kodera as the company heads towards launch of a “PS5” that some say will be launched in 2020. * SO WHAT? * It would be fair to say that Sony kicked Microsoft’s @ss with its PS4 in terms of unit sales, but it will face yet another bun fight with its American nemesis in the next generation of consoles. Cloud gaming is likely to become a key battleground as each one tries to become the “Netflix of games”. The race is well and truly on! Gotta love a console launch – the hype is very enjoyable!

Activision Blizzard to cut staff in broad restructuring (Wall Street Journal, Patrick Thomas and Sarah E. Needleman) heralds some tough times for games developers as one of the “biggies” has announced plans to cut 8% of its 9,800-strong workforce as it is feeling the pinch from changing gamer behaviour. Developers are increasingly finding that gamers are spending money and time on fewer games that they can play in perpetuity (with Fortnite being the top dog at the moment), meaning that their vacillation can have much bigger financial ramifications. Having said that, Activision Blizzard announced that it will boost its numbers of developers by around 20% in order to beef up content for existing franchises like Call of Duty – a key strategy that has powered the continued success of Epic Games’ Fortnite. * SO WHAT? * In the same way that retailers are having to adapt to changes in the way consumers shop, I think we are at the beginning of a major change in the way gamers interact with content and anyone who doesn’t recognise this is going to find life very difficult. At least Activision Blizzard is recognising this.



Nissan’s woes continue but Michelin shoots the lights out…

Nissan cuts profit forecast as it takes £65m Carlos Ghosn charge (The Guardian, Julia Kollewe) highlights Nissan’s ongoing woes as the car giant cut its full-year profit forecasts and announces a £65m charge relating to the whole Carlos Ghosn scandal that’s going on at the moment. The main reason behind the full-year cut was cited as being weaker global car sales. Tensions continue between Nissan and Renault and this latest bit of bad news for the company shows further evidence of weakness for all carmakers.

Michelin shares soar on improved full-year profit guidance (Financial Times, David Keohane) heralds some surprise good news for the French tryemaker as it upped its profit guidance for the year despite tricky trading conditions that prompted a profit warning last October that resulted in its steepest share price drop for eight years (so this latest rise is from a low base!). There will be some changes at the top of the company over the next few months as COO Florent Menegaux will step up to the CEO position as the current incumbent, Jean-Dominique Senard moves to Renault to replace the embattled Carlos Ghosn as chairman. Other suppliers Pirelli and Continental both got a boost in their share prices as the mood lightened. * SO WHAT? * Clearly, the automotive sector is in a right pickle at the moment (heading for “car-mageddon”), but I guess that the overarching thing is that even though new car sales are generally falling globally, drivers will still have to replace their tyres.



And finally, in other news…

I thought I’d leave you today with the news that the house where Jeff Bezos started Amazon is up for sale in Beginning of a billionaire’s empire: three-bedroom one-story house in Seattle – with the garage where Jeff Bezos founded Amazon – hits the market for nearly $1.5million (Daily Mail, Faith Ridler Nice!

Some of today’s market, commodity & currency moves (as at 0831hrs 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 **
7,133 (+0.06%)25,426 (+1.49%)2,745 (+1.29%)7,41511,126 (+1.01%)5,056 (+0.84%)21,144 (+1.34%)2,721 (+1.84%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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