Wednesday 14/07/21

  1. In MACRO NEWS, US inflation picks up and Chinese exports rise
  2. In FINANCIAL SECTOR NEWS, the Bank of England OKs payouts, Goldman and JP Morgan benefit from advisory and Vanguard makes its first acquisition
  3. In TECH NEWS, Google gets a French fine, Didi’s competition take advantage and Nokia gets confident
  4. In POST-CORONATREND NEWS, there’s confusion about a return to office, Slaughter & May experiments with hybrid working, nightclubs open, British Land collects more retail rent and Pepsi ups its outlook
  5. AND FINALLY, I bring you some poor online shopping choices…



So US inflation heats up and Chinese exports rise…

Pace of US inflation picks up again in test for Fed (Financial Times, Colby Smith and James Politi) shows that prices rose in the US at their fastest pace – up by 5.4% from the previous year – since August 2008! The latest data from the Bureau of Labor Statistics also showed that they were up by 0.9% on a monthly basis, the biggest monthly rise since June 2008. * SO WHAT? * The 5.4% figure was way above the consensus forecast of 4.9% and will continue to squeeze the Fed’s resolve that inflation rates can safely be left untouched because such inflation rises are “temporary”. Interestingly, one third of last

month’s rise was down to burgeoning second-hand car prices! I still think that the Fed is going to have to shift its stance as prices rises continue to gain momentum – and the economy isn’t even fully open yet! 

Then in Chinese exports rise eases fears over global recovery (The Times, Philip Aldrick) we see that exports from China shot up by a chunky 32.2% in June versus the previous year, way above consensus expectations of 23%. Although exports to the US weakened, exports to the EU, Japan and Asian emerging markets picked up pace from May. * SO WHAT? * China has become a global economic bellwether over the course of the pandemic as it is seen as the world’s factory. Decent growth in exports and industrial production show that global demand is picking up as economies start to navigate back towards normality.



The Bank of England relents, Goldman & JP Morgan benefit from advisory fees and Vanguard goes shopping…

BoE lifts Covid restrictions on shareholder payouts (The Guardian, Kalyeena Makortoff) shows that the Bank of England is now going to allow shareholder payouts because it feels that the UK’s biggest lenders are resilient enough to economic risks to resume such actions. * SO WHAT? * This just follows similar conclusions in the US and Europe and was widely expected. The Bank covered its 🍑, though, by listing various “new risks” such as the end of furlough, rising risk appetite in global financial markets (yes, Andrew Bailey had a dig at crypto again) and fears about a growing reliance on a small number of unregulated cloud service providers (Amazon, Google and Microsoft) who form the backbone of core banking services.

I thought that it was particularly interesting to see Goldman and JP Morgan pivot to M&A as Covid trading boom fades (Financial Times, Joshua Franklin and Imani Moise) because it seems that there has been a change in direction for their revenues. Market volatility during lockdown stoked a frenzy of trading as investors tried to “buy high, sell low” and M&A activity slowed to a trickle briefly as companies were caught in the headlights. That seems to have changed now as the Wall Street banks reported a boom in advisory fee income from increased M&A and IPO activity. * SO WHAT? * The jury is out as to whether all of this IPO and M&A momentum is sustainable but the investment banks continue to talk a good game about the pipeline. Mind you, things like the current clampdown by China on tech companies looking to list

abroad will put a dent in some of the bravado and market sentiment can be fickle, so it’s not a given that the party will continue. For now, though, the Bolly will be on order, the Lambo garages will be limbering up for more sales and shiny-suited estate agents will be getting ready to sell big houses as they line up to take a bite out of the big bonus pie 😂.

Elsewhere, Vanguard makes first acquisition with Just Invest deal (Financial Times, Chris Flood and Steve Johnson) highlights the first acquisition in its 46-year history – California-based wealth management boutique Just Invest. The US start-up enables individual investors to customise existing indexes to suit their values and beliefs (e.g. “be nice to the environment, don’t buy companies that make stuff that kills people” etc.) for their own portfolios. * SO WHAT? * This is a pretty big deal given that Vanguard has grown organically until now, but this deal follows similar ones by rivals BlackRock (which bought Aperio Group) and Morgan Stanley (which bought Eaton Vance last year), among others. I know I’ve banged on about it in the past but I really think that wealth management is a huge growth area because there is a general move by the state to push more responsibility for future finances onto individuals as we all live longer. Also, with the advent of more resources that enable better understanding of the knotty world of finance, individuals are taking an increasing interest in growing their own money. Giving robo-advice is one thing (this covers many people who have basic needs, but it can also act as a “ramp” onto more bespoke advice) I think that fees for investment managers can be justified by offering increasing levels of customisation. For now, though, Vanguard will be offering this new service to the wealthier end of its client list – but this company is known for bringing finances to the masses, so perhaps it will reach mere mortals in the not-too-distant future!



Google gets slapped, Didi’s competition makes hay and Nokia gets confident…

Google fined €500m by French regulator in news copyright row (The Times, Simon Duke) highlights a win for the French competition regulator as it fined the internet giant for violating an order to agree licensing deals with publishers to use snippets of their content in its search results. It’s now given Google a two month window to rewrite its proposals or get a fine of up to €900,000 a day. * SO WHAT? * The tussle between publishers wanting to be paid for content and Google saying that they are being paid in “exposure” because it boosts traffic to publishers’ apps and websites has gone on for years. Google is clearly miffed but then again Australia passed legislation that was similar to the EU’s directive and after initial opposition, Google caved and signed various agreements with publishers including News Corp back in February. Will Google relent once more?

Rivals rush to take advantage of security crackdown on China’s Didi (Financial Times, Christian Shepherd and Yuan Yang) shows that rivals of the currently-embattled Didi Chuxing are taking the advantage of the giant’s weakness (Didi accounts for a whopping 90% of all car bookings in China!) by announcing expansion plans, offering discounts and boosting driver benefits. There are 230 apps vying for Didi’s business as the giant is embroiled with the Cyberspace Administration of China (CAC), with

Cao Cao, T3 Chuxing and, interestingly, Meituan (famous for food delivery, but now relaunching its ride-hailing service) all trying to profit from Didi’s current incapacitation. The CAC’s investigation into Didi’s data security could last up to 10 weeks and, during this time, it will not be allowed to register new users. With all this going on, Didi is hoping that its cheaper Piggy Express (!) service launched in March 2020 aimed at younger users will keep things ticking over as this was not removed from the app stores. * SO WHAT? * You can’t blame rivals for trying to claw away at Didi’s massive market share while it is down, but I would have to say that Didi is soooooo powerful that I’m sure it could swat any rivals aside when it comes back, if it was left to its own devices. I guess that the danger here is that the regulators could make a bit of an example of Didi and force it to make concessions. This is a major cloud hanging over the company for the near-term and will not lift until judgment is made. In the meantime, it’s the sin-bin for Didi!

Nokia to lift financial guidance for 2021 as turnaround progresses (Financial Times, Richard Milne) shows that the Finnish company is feeling pretty confident about the full year as a tricky period, that included major job cuts and losing out to rivals Ericsson and Huawei in the early days of 5G, appear to be coming to an end. It didn’t reveal much in the way of specifics in terms of guidance, but its Q2 results will be published at the end of this month. * SO WHAT? * You would have thought that Nokia is bound to benefit from all the Huawei-bashing that has gone on for the last 18 months or so and that it will catch up with rivals as more countries do their respective 5G rollouts.



The office return kerfuffle, nightclub openings, retail rent take rises and Pepsi maxes it…

Anger over chaotic plan for return to the office (Daily Telegraph, Hannah Boland, Russell Lynch and Lucy Fisher) shows that businesses are getting their underwear in a twist following the announcement of vaguer-than-expected guidance from the government about workers returning to offices. Businesses are fearful that a lack of clarity will increase litigation risk and I guess that the government is possibly shying away from being the “bad guy”. Still, law firm Slaughter & May is taking things into its own hands regarding its return to the office in Law firm trials flexible working schemes with junior lawyers (Financial Times, Kate Beioley) as it has decided to test out a number of different options for junior lawyers that could reshape the way they work in future. The company is looking at three schemes: firstly “switch on/off” where lawyers cut their own hours during the year with big blocks of leave in return for reduced pay, secondly there is an option for project-based lawyers to take time off between projects and, thirdly, there is an option to split jobs on reduced hours. * SO WHAT? * No-one wants to be the villain in the return to

offices, but you can understand why businesses want more clarity to protect themselves. As for Slaughter & May, I think that this sounds like a very enlightened approach to work but I still say that no matter what the “culture” is at a law firm, it is the CLIENTS that call the shots. If the client can’t get its favourite lawyer to oversee their business, they may decide to try somewhere else. If that becomes a pattern, all these HR pet projects will just go out of the window IMO.

Meanwhile, in other post-coronavirus trends, Nightclubs prepare to reopen doors – but foam parties on hold (Daily Telegraph, Hannah Boland) shows that nightclubs will be able to reopen next week after 16 months of pretty much zero activity, Return of shoppers lifts rent collections at British Land (Daily Telegraph) shows that retailer fortunes are turning around enough for them to feel more confident about paying rent (landlord British Land said that 85% of June’s rent bill has been collected with 71% of retailers coughing up) and Pepsi lifts 2021 outlook as soda sales rebound (Financial Times, Matthew Rocco) shows how the opening of bars, cafés etc. is helping prospects for fizzy drinks. * SO WHAT? * Business really seems to be rebounding and I would expect the momentum to continue at least over the summer as more people enjoy more freedoms!



…in other news…

We’ve all done more online shopping over the last year, haven’t we! Well what you get sometimes isn’t quite what you were expecting as per Re-fail therapy! Unhappy shoppers showcase their worst online purchase fails (The Mirror, Rosaleen Fenton) 😂.

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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 **
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