Wednesday 15/07/20

  1. In MACRO & POLITICAL NEWS, Macron promises more money for recovery, the UK’s economic output rises and Johnson announces a Huawei ban
  2. In CONSUMER TRENDS & RETAIL NEWS, the stamp duty holiday raises interest in the ‘burbs, VAT cuts might not be passed on, Ocado and AO are sitting pretty and Asos cancels suppliers
  3. In AIRLINES & CAR NEWS, Virgin gets rescued, Delta pushes retirement, GM focuses on China and LG Chem’s battery orders are massive
  4. In INDIVIDUAL COMPANY NEWS, Moderna moves to the next stage and Fevertree gets a boost
  5. AND FINALLY, I bring you Lego Nintendo and some interesting “masks”…



So Macron flashes the cash, UK economic output increases and Huawei gets banned…

*** BTW, did you know I do a podcast? You can listen to it on Apple Podcasts, Spotify and Google Podcasts. At the moment it’s a weekly roundup, but there will be more content to come…Also, if you DO like the podcast please write me a nice review with a few comments as to WHY you find it interesting/useful! It REALLY helps and I would appreciate your input 👍***

Macron promises extra €100bn for France’s post-pandemic recovery (Financial Times, Victor Mallet) highlights French president Macron’s new additional pledge of €100bn on top of the €460bn already earmarked to stimulate France’s economic recovery from the pandemic. He made the pledge in a televised address yesterday, vowing to continue with his economic reforms (including the country’s incredibly complex and expensive pensions system). * SO WHAT? * Macron has alienated a lot of people since he became president in a landslide victory in 2017 (he is often criticised as being a president for the rich). Everyone suffers mid-term blues, but clearly the coronavirus has really made things much harder for everyone. He comes up for re-election in 2022, so there is still chance for him to make up ground and heal some of those divisions.

UK economic output rises 1.8% in May after historic April plunge (Financial Times, Valentina Romei) cites the latest

figures from the Office for National Statistics which show a lower-than-expected increase in economic output. * SO WHAT? * This figure fell way shorter than market expectations of a 5.5% rise in GDP. It would suggest that a recovery will take longer than everyone had been predicting and that hopes of a V-shaped recovery were just a pipe dream.

UK orders ban of new Huawei equipment from end of year  (Financial Times, George Parker, Nic Fildes, Helen Warrell and Demetri Sevastopulo) shows that Boris Johnson has indeed gone back on his original plans and has decided to ban Huawei as a supplier, meaning that Britain’s 5G rollout could be delayed for up to three years. He said that telecoms operators had up to 2027 to remove Huawei equipment from their networks and that a ban on their new equipment would take effect at the end of the year. Network ban triggers gold rush as rival suppliers eye bumper payday (Daily Telegraph, Hannah Boland) highlights what will be happening after the ban as Huawei currently has a massive 44% share of the UK’s full-fibre equipment market. Nokia and Eriksson are already in the space, but Samsung and NEC will also now be stepping up. * SO WHAT? * Clearly this is a massive pain for Huawei, especially after BoJo had originally backed them but Fact-checking: How much kit needs to go? (Daily Telegraph, Hasan Chowdhury) points out that most UK 5G networks depend on existing equipment including antennas and base stations used for 4G. Interestingly, much of the stuff that was installed in 2012 and 2013 is now getting to the end of its life cycle – so a lot it would have had to be replaced anyway. No doubt this new government stance will help in ongoing UK-US trade negotiations!



The stamp duty holiday and VAT cut kick in, Ocado and AO benefit and Asos cuts suppliers…

Stamp duty cut fuels surge of interest in London commuter belt (The Guardian, Patrick Collinson) says that the raising of the stamp duty threshold last week has led to a spike in interest in the southern England commuter belt, according to the UK’s biggest property website Rightmove. Funnily enough, the biggest rise in activity has been in homes costing between £400,000 and £500,000 (£500,000 is the new limit at which stamp duty starts to kick in again) and enquiries have just shot up. * SO WHAT? * Buying within this bracket under the new guidelines saves people around £15,000 and the areas that have seen particularly strong interest include places like Chelmsford, Swindon and Bromley. Given that working from home is likely to become a more permanent option, it makes sense that people would look to the ‘burbs for more space (=home office) and more bang for your buck.

Hospitality VAT cut may not be passed on to UK consumers (The Guardian, Hilary Osborne and Rebecca Smithers) shows that although the government cut VAT for the hospitality sector, those cuts may or may not be passed on to the end consumer. Many have lost money as a result of the pandemic and so are hanging on to the extra – so don’t expect cheaper prices everywhere! The Treasury said that it would rather businesses pass on the benefit to customers but acknowledges that “many of these businesses have been closed and without income for months, and decisions on prices are ultimately for businesses rather than the government”.

In retailing, Ocado has waiting list of 1 million customers wanting to sign up (The Guardian, Sarah Butler) says that although it has done well during the pandemic as people shopped more online, it could have increased sales by five times but had been limited by its warehouses and delivery network. Sales rose by 40% in May and Ocado but it only signed up 14% more shoppers in the six months leading up to it due to capacity constraints. CEO Tim Steiner said that he expected online grocery shopping would double in the next few years having already doubled in size during

lockdown. * SO WHAT? * Although sales were up, the company fell into a pre-tax loss of £40.6m due to investment in its overseas expansion and profit margins were hit because it had to bring in extra staff to cover absences and buy virus tests and PPE. Supermarkets were able to take more advantage of the sudden uptick in online grocery demand because of their existing networks. Although Ocado is impressive, it will always be held back by the fact that its cutting edge warehouses take a lot of time to become properly operational.

Online sales ‘make John Lewis price promise irrelevant’ (The Times, Ashley Armstrong) shows that the CEO of AO World, John Roberts, was in a bullish mood yesterday as his company posted a 15.9% rise in sales for the year. Despite a rise in online shopping and an improved performance by its German business, the company remained cautious for the rest of the year. The company said that “Although around 70 per cent of electrical purchases are replacement in nature, a fall in consumer confidence may lead to a delay in the purchase of big-ticket items”. * SO WHAT? * The quote in this article’s title touched on the fact that offline shopping continues to be trounced by online shopping – and is personified by veteran retailer John Lewis’ anachronistic price promise of “Never Knowingly Undersold”. John Lewis admitted recently that 70% of its sales are now online – and so it is actually already underselling itself! Anyway, it’s interesting to see how AO has made a turnaround following the return of the founder last year. Coronavirus and the strong demand for chest freezers, breadmakers and laptops have got it out of a rut, but ebbing confidence in household finances as we head into the end of the year would suggest that caution is the sensible option here.

Asos axes UK suppliers’ contracts over ethics worries (Daily Telegraph, Laura Onita) shows that another fast-fashion firm – this time Asos and not Boohoo – has cut ties with a number of clothing suppliers after it found potentially serious threats to workers’ health, safety and human rights. A leaked document, dating as far back as May 2018, identified supply chain concerns after carrying out inspections which found problems in 25% of the companies it audited. * SO WHAT? * As I said before, I suspect that the Boohoo thing is just the tip of the iceberg – and that it is not the only one that has its hands dirty in matters related to workers and conditions.



Virgin finds a solution, Delta pushes early retirement, GM looks to China and LG Chem has enough battery orders to be getting on with…

In a quick scoot around airlines and car-related news today, Virgin Atlantic lands rescue without taxpayer support (Daily Telegraph, Oliver Gill) highlights a victory of sorts for Sir Richard Branson as he agreed a complicated £1.2bn rescue deal with US hedge fund Davidson Kempner to keep Virgin going and Delta steers 17,000 staff into early retirement (Financial Times, Claire Bushey) shows that the high number of employees opting for early retirement at the Atlanta-based airline will help it impose fewer furloughs than some of its rivals. The airline industry continues to suffer, though…

Then in GM faces battle in China to regain lost ground (Wall Street Journal, Trefor Moss) we see that the US car manufacturer is feeling the pressure particularly keenly on doing business in China as almost 50% of its global unit sales come from there, making it more exposed than most of its rivals. GM is trying to pep up its market share by introducing new models after seeing a 25% downturn in sales in the last two years. On the plus side, the latest official figures from the China Association of Automobile Manufacturers show that the auto market is bouncing back faster than expected – so good luck to GM!

I thought I’d include World’s top EV battery maker piles up $125bn in orders to ride out pandemic (Financial Times, Song Jung-a) as it highlights the amazing fact that the world’s largest electric vehicle battery manufacturer, LG Chem, said it has enough orders to keep it busy for the next five years! LG Chem has about 25% market share of the global market and it is now ahead of China’s CATL. Wow!



Moderna makes advances and Fevertree benefits from home drinking…

In other news today, Moderna’s Covid-19 vaccine moves to bigger study (Wall Street Journal, Peter Loftus) shows that the company’s experimental Coronavirus vaccine is advancing to the next stage of clinical trials. Potentially good news – and the company’s share price shot up by almost 14% in after-market trading yesterday.

Then in Fevertree toasts lockdown surge in G&Ts (Daily Telegraph, Hannah Uttley) we see that the drinks mixer specialist continues to benefit from people drinking themselves into a daily stupor G&Ts as sales jumped by 34% in the latest quarter at supermarkets and off-licences. Although this is probably a bit of a blip, I imagine there will be an ongoing positive effect – and when pub sales start to kick in again, things will improve once more.



…in other news…

I thought I’d leave you today with a superb nostalgic “collab” in Lego Nintendo Entertainment System lets you ‘play’ Mario on a TV made of blocks (Tech Radar, Stephen Lambrechts) and the quite frankly hilarious Shopper spotted using paper bag as face covering – and others have used knickers (The Mirror, Courtney Pochin). The photo of the woman wearing a box over her head is particularly impressive IMO 😂…

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Some of today’s market, commodity & currency moves (as at 0750hrs 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 **
6,180 (+0.06%)26,643 (+2.13%)3,198 (+1.34%)10,489 (+0.94%)12,697 (-0.80%)5,007 (-0.96%)22,942 (+1.57%)3,361 (-1.56%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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