Wednesday 15/05/19

  1. In MACRO & CRYPTO NEWS, UK sees record employment and Bitcoin breaks $8,000
  2. In CAR-RELATED NEWS, India’s weaker car sales prompt concerns, Nissan has a shocker and Volvo Cars signs a battery deal
  3. In RETAIL-RELATED NEWS, Walmart offers next-day shipping, Next gets with Amazon and Landsec has mall troubles
  4. In INDIVIDUAL COMPANY NEWS, Disney takes control of Hulu and Vodafone disappoints
  5. In OTHER NEWS, I bring you an unfortunate name. For more details, read on…



So UK unemployment hits new lows and Bitcoin breaks another barrier…

UK wage growth stalls despite record employment (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which show that while unemployment fell from 3.9% to 3.8% in the latest quarter, wage growth actually slowed down from 3.5% to 3.3% over the same period. Mike Jakeman, a senior economist at PwC, said that “It is possible to see the shadow of Brexit in some of these figures. March was the month when Brexit anxiety was at its most acute, and it might have been the case that firms were more reticent to offer higher wages and advertise new positions in these weeks”. * SO WHAT? * The wage growth thing is obviously disappointing from an employee point of view, but at least it is still outpacing inflation. However, it remains to be seen whether this is a one-off, or whether it’s all downhill from here on that front.

Bitcoin price surges through $8,000 barrier (The Times, James Dean) highlights Bitcoin’s continued rise as it broke through $8,000 for the first time in ten months as its recent rally continues. The best explanation anyone can come up with at the moment is that there were some big trades done over the weekend that pushed the price up. * SO WHAT? * I think that it’s a bit unnerving that no-one can

really explain the recent rally properly. When I was a newbie stockbroker, I remember asking trader colleagues questions every now and then about specific price hikes and when I got the explanation “there was a big trade in the market” this was usually code for “Sorry, but I don’t have a clue” ???? (although, TBF, this was sometimes the reason). David Siemer, chief exec of Wave Financial, an investment firm that focuses on cryptocurrency technology (so he’s HIGHLY likely to be biased, given that it’s his livelihood) said that “It’s a natural hedge…It’s a non-correlated asset with the stock market and it’s proven that a lot of times”. Yeah, right – cryptocurrency as the new gold “investment safe haven” option? I think not – you can’t hack gold, right?? Like I said yesterday, there appears to be an upswing in legitimate institutions (like Fidelity) who are starting to dabble in crypto and if this momentum increases, it will bring these currencies into the mainstream. If THAT happens, crypto values will rise. IMHO, I’m a fan of the blockchain tech behind these currencies but I am still sceptical about Bitcoin (and all the other dodgier cryptocurrencies, dubbed by some collectively as “Sh!tcoin”) itself at the moment as anything other than a highly risky fringe investment.



A weaker Indian market raises questions, Nissan has a shocker and Volvo Cars signs a battery deal…

India’s stalling car market sparks wider concerns (Financial Times, Simon Mundy) takes a look at India’s car market as a bellwether for the wider economy given that car sales are driven (no pun intended) by growing urban disposable income. Massive expansion between 2015 and the first half of 2018 led to some observers forecasting that India would overtake Japan and Germany to become the world’s third biggest car market. However, the latest figures released by the Society of Indian Automobile Manufacturers show that passenger car sales last month took a whopping 17.7% hit than the same month in 2018, with “two-wheeler” sales (which is a sign of rural economic health) down by 16% and commercial vehicle sales down by 6%. The main reason behind this drop is thought to be a clampdown on non-bank financial companies (NBFCs), who have been particularly prevalent in vehicle loans and lending to SMEs. * SO WHAT? * High end urban consumption accounts for over a third of TOTAL consumption in India – and so if this segment of society is suffering, it is a big deal. If you add to that falling sales of motorbikes and tractors (which signify a downturn in the rural economy) in addition to lower sales of commercial vehicles (which reflects falling credit being extended to small businesses) then you have an even bigger problem. This is obviously a bit of a sore point for PM Narendra Modi, who is currently running a general election campaign where he is arguing that his government is presiding over a period of economic growth. For car manufacturers, India still represents a market with huge potential – but for now, its growth prospects may be limited.

Elsewhere, Nissan warns profits to fall to lowest level in more than a decade (Financial Times, Kana Inagaki) continues the generally gloomy rhetoric of Japanese car manufacturers as Nissan said that it will be abandoning the expansionist strategy espoused by its former chairman Carlos Ghosn. Current chief exec, Hitoto Saikawa, blamed falling profits on Ghosn’s efforts to expand in America and emerging markets and announced a new plan that involved 4,800 job cuts and a 10% reduction in global capacity. * SO WHAT? * This signals a strategic change in direction and will increase doubts over Nissan’s relationship with Renault as Saikawa continues to be opposed to the full merger that had been supported by Ghosn. Other than that, this just sounds like a classic kitchen-sinking exercise where a new chief blames everything old the departed predecessor. Saikawa said he needs two to three years to turn things around, but I think that his success will largely depend on who he puts in the top management jobs and whether they are able to deliver.

Volvo Cars signs electric battery deal with two Asian manufacturers (Financial Times, Peter Campbell) heralds the signing of a deal with Chinese battery manufacturer Contemporary Amperex Technology (CATL) and South Korean chemical group LG Chem to supply it with electric car batteries until 2028. Volvo aims to have half of its sales to be fully electric by 2025, so big volumes of batteries will be needed. Car makers continue to fight to secure suppliers of batteries to support predicted increases in electric vehicle sales. * SO WHAT? * This seems to be a solid strategic move by Volvo as it secures future supplies for its Polestar EV brand. It’ll be interesting to see whether the company gets anywhere close to its EV sales target, but given that it is owned by Chinese manufacturer Geely and that China is making a MASSIVE push in this area, you’d think that they have a decent fighting chance.



Walmart delivers, Next sidles up to Amazon and Landsec bemoans its malls…

In Walmart turns heat up on Amazon with next-day shipping service (Financial Times, Alistair Gray) we see that the retailer has announced plans to cut US delivery times to one day for online shoppers who spend at least $35. The new service will kick off in Phoenix and Las Vegas and then be rolled out to southern California in the coming days and everywhere else in the coming months, eventually reaching 75% of the US population by the end of the year. The company argues that this will save costs as its delivery hubs will enable deliveries to be in a single box (or as few as possible) whereas online orders from Amazon come in multiple boxes from multiple locations, which increases costs. Walmart also announced that it will be refitting hundreds of its stores and providing click-and-collect facilities. * SO WHAT? * It sounds like this sleeping giant has been well and truly poked by Amazon’s ongoing success and is AT LAST doing something concrete to get things moving online – whilst at the same time integrating and updating its existing offline business. Good moves. Let’s see whether they make more money as a result!

Talking of click-and-collect, Amazon teams up with Next for collections (The Times, Elizabeth Burden) shows that Amazon has signed a deal with Next where Amazon customers will be able to collect their orders from Next shops in a click-and-collect service called Amazon Counter. Amazon is currently looking to attract other partners to do something similar as it aims to get closer to its customers. * SO WHAT? * This sounds great like a decent strategy for both companies – Amazon gets to serve its customers even more effectively and Next gets access to more foot traffic, which should generate more sales. You do wonder how much Next is having to pay for the privilege of doing this, but clearly there must be some benefit as its chief exec Lord Wolfson is not known for frittering away cash. It’ll be interesting to see who else signs up.

Landsec malls’ value plummets (Daily Telegraph, Jack Torrance) looks at one of Britain’s biggest property companies, Landsec (which owns Bluewater in Kent and One New Change in London) as it warns of more retail sector strife with chief executive Rob Noel saying that “vacancies are rising and rents are falling fast”. The company announced a loss of £123m in the year to March which was mostly due to a £557m fall in the value of its portfolio but the company remained optimistic about growth in London. * SO WHAT? * I thought I’d include this story because it’s interesting to see what’s going on in retail from the point of view of a landlord – and I think it would be fair to say that the outlook is not looking all that brilliant.



Disney aims to take full control of Hulu and Vodafone disappoints…

In other big news today, Disney gains full control of Hulu in Comcast deal (Wall Street Journal, Joe Flint) we see that Disney has done a deal with Comcast so that it can take full control of Hulu that will see an end to the latter’s often complicated ownership structure. Disney is close to launching its own streaming service called Disney+ that will focus on content for families and children while Hulu will be expected to be aimed squarely at adults. * SO WHAT? * This sounds like a pretty good deal for all concerned as Disney gets more control, Comcast gets to crystallise its investment in Hulu whilst having a stake in its future success and Hulu gets to have one parent. Simples. Unlike the deal itself (the terms of which you can see in the full article!). 

Vodafone slashes dividend 40% to bolster balance sheet (Financial Times, Nic Fildes) is a story doing the rounds today as it piled on the disappointment that has driven its share price down from 230p at the start of 2018 to the current 130p. Spectrum auctions for 5G in Italy and Germany along with difficult trading conditions in Italy and South Africa have ratcheted up investor concerns over the size of the company’s debt and this dividend cut is partly in response to this situation as it slashes costs and sells off non-core assets ahead of a €18.4bn deal to buy Liberty Global’s German and eastern European cable assets. * SO WHAT? * This is a big deal because it is Vodafone’s first dividend reduction in almost 20 years. It faces a bumpy road ahead and makes it even more important to ensure that it gets 5G right. Short term pain for long term gain? After all, it’s not the only telecoms company that’s having to ramp up its spending on 5G…



And finally, in other news…

I thought I’d leave you today with a tricky situation faced by a mother who is a Game of Thrones fan in ‘Shocked’ mum who called daughter ‘Khaleesi’ has strong feelings over that name choice now (The Mirror, Zahra Mulroy Tricky!

Some of today’s market, commodity & currency moves (as at 0844hrs 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 **
7,242 (+1.09%)25,532 (+0.82%)2,834 (+0.80%)7,73411,992 (+0.97%)5,341 (+1.50%)21,189 (+0.58%)2,939 (+1.91%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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