Wednesday 17/10/18

  1. In MACROECONOMIC AND MARKETS NEWS, the Saudi drama continues, Macron reshuffles his Cabinet, UK wages are up and US markets surge strongly
  2. In US COMPANY NEWS, Goldman Sachs and Morgan Stanley power ahead, Netflix unveils a great Q3 and the IPO race is on between Uber and Lyft
  3. In EUROPEAN COMPANY NEWS, Aldi and Lidl continue to trounce everyone else and BAT cuts its vaping target
  4. In OTHER NEWS, I bring you tidings of a new toastie shop. For more details, read on…



So the Saudi Arabian drama continues, Macron reshuffles the deck, UK wages get a lift and US markets make up lost ground…

Trump alleges rush to judgment in Khashoggi case (Financial Times, Demetri Sevastopulo, Katrina Manson and Simeon Kerr) heralds the latest in the murder/disappearance of the dissident journalist saga as Trump is now backpeddling like mad after his initial threats to punish Saudi Arabia as he said in an interview yesterday that “We have to find out what happened first. Here we go again with…you’re guilty until proven innocent. I don’t like that. We just went through that with Justice Kavanaugh and he was innocent all the way as far as I’m concerned”. Saudi Arabia pulls planned deal with Hyperloop (Financial Times, Simeon Kerr and Andrew Edgecliffe-Johnson) serves as a warning to the regime’s critics as it pulled out of a planned deal with Sir Richard Branson’s Virgin Hyperloop One after The Bearded One said he’d cuts ties with the kingdom until more details came to light about Khashoggi. * SO WHAT? * This whole charade is continuing apace with Trump’s assistance basically because he can’t afford to p!ss off the Saudis. My prediction is that once this whole Khashoggi thing gets buried, Saudi Arabia will magically increase oil production to ease prices as a “thank you”. On the other hand, things could get pretty entertaining if Khashoggi turned up alive and well spotted at the local Apple store buying an upgrade for his Watch OR if Turkey just decided to “leak” the footage of the alleged murder. If the latter happened, all hell could break loose as all sides scramble to discredit the source and big sanctions come into force (although I really wonder how long THAT would be sustainable) but I would be amazed if that happened because Turkey could gain so much more by NOT releasing it. Talk about having an ace up your sleeve.

Following on from recent reports of the French president’s flagging popularity amid a raft of senior resignations, Emmanuel Macron unveils new cabinet in long-awaited reshuffle (Financial Times, Harriet Agnew and David Keohane) highlights his efforts to give a “second wind” to his sputtering administration. He’s installed Christophe

Castaner as interior minister to plug the gap left by Gerard Collombe who resigned two weeks ago and ousted several others whilst bringing in eight newbies – one of whom is Gabriel Attal who, at 29, was named as junior education minister and became the youngest member of government in France’s modern history. * SO WHAT? * Clearly a refresh was needed, but it still won’t detract from people’s perceptions that Macron remains out of touch with the electorate. Mind you, in his first year in office, Macron has managed to push through reforms of France’s wealth tax, taxes on dividends and the labour market. Next up in his crosshairs will be pension reform and huge job cuts in France’s civil service – so he’s going to need all the support he can get.

UK pay growth reaches highest level since 2008 crisis (The Guardian, Larry Elliott) cites the latest data from the Office for National Statistics (ONS) which shows that regular pay excluding bonuses was 3.1% higher in the three months to August than in the same quarter in 2017. Having said that, it pointed out that real pay – which takes into account the impact of price increases – was £11 a week lower than it was before the financial crisis. As the ONS head of labour market statistics, David Freeman, put it “People’s regular monthly wage packets grew at their strongest rate in almost a decade but, allowing for inflation, the growth was much more subdued”. * SO WHAT? * Good news for workers, but there’s still room for improvement. Let’s hope that the Bank of England looks at the real rate of pay rather than the headline figure when it decides the next interest rate move.

Stocks surge, erasing some recent losses (Wall Street Journal, Akane Otani) highlights a solid market performance yesterday on the back of positive jobs data and continued strength in corporate profits. The Dow was up almost 500 points and the tech stocks that had taken a bath recently rebounded strongly. * SO WHAT? * Yes, there are some hurdles on the horizon but corporate America is on a winning streak at the moment. As I said the other day, tech stocks in particular as still producing real stuff that punters crave so any concerns about some kind of tech bubble bursting right now look a bit overdone. Having said that, trade war chat-related fears are valid because no-one knows what the outcome is going to be. It would be ideal for Trump if he could solve this before the midterm elections because I’m sure we’d see a major boost to the financial markets in a sort of relief euphoria – but it seems that we are not anywhere near a settlement at the moment.



Goldman Sachs, Morgan Stanley and Netflix announce strong figures while the IPO race is on for Lyft and Uber…

In Goldman, Morgan Stanley show Wall Street charging ahead (Wall Street Journal, Liz Hoffman) we see that both companies announced much higher third quarter earnings – profits up 19% and 20% respectively – after a week of big banks unveiling strong numbers. All six of the biggest US banks have now reported higher profits versus last year.

Netflix crowns excellent third quarter (The Times, James Dean) shows a company back on track after it suffered a 13% sell-off in its shares when it announced weaker-than-expected subscriber numbers in July this year. It added seven million new subscribers – a full two million more than it had forecast back in July – and announced a bullish forecast for the fourth quarter of 9.4m subscriber adds. The shares jumped by 14.3% in after-hours trading. * SO WHAT? * This is great news for the 

company. The fact that it is spanking the cash on more and more proprietary content is a given, which makes everyone super-sensitive to subscriber numbers, hence the wild share price movements when the company delights or disappoints. As far as I’m concerned there is still a lot of growth to go for here as I don’t think we’ve reached “subscription saturation point” just yet. That time will come, but not for a while longer.

I thought that Uber and Lyft in race for Wall Street listing (The Times, Tom Knowles) was worth mentioning because of the sheer amounts of money being bandied about. People are talking about Uber being valued at a whopping $120bn if it lists next year – which would make it bigger than General Motors, Ford and Fiat Chrysler combined!Its smaller rival Lyft is expected to float in the first half of next year for a more “modest” amount north of the $15.1bn it was valued at this year. Given that Lyft made 375 million rides last year versus Uber’s 4 billion, you can see why the valuations are a teensy bit different. Fun fact for you: Uber only has to offer around 21% of its shares to be the biggest IPO ever. If co-founder Travis Kalanick sold off his entire stake at that valuation, it would net him a rather nice $8bn! Think of the number of “Appropriate Behaviour in the Workplace” and Anger Management courses he could do for that ;0)



In European company news, it’s onwards and upwards for Aldi and Lidl and British American Tobacco cuts its vaping target…

Aldi and Lidl leap ahead as big four rivals struggle to make up ground (Daily Telegraph, Rhiannon Curry and Ben Woods) shows that the discounters are putting further clean air between themselves and the likes of Tesco and Sainsbury’s, according to the latest stats from Kantar Worldpanel. * SO WHAT? * Although this is obviously disappointing for the big four, in some ways Sainsbury’s and Asda might be secretly pleased because it is something that the Competition and Markets Authority 

(CMA) will have to take into account when scrutinising their proposed £15bn merger. Continued strength by the discounters and other newer players will make the deal more likely to go ahead and less likely to get scuppered because the enlarged entity would be too dominant.

BAT cuts vaping target and profit forecasts as new CEO steps up (Daily Telegraph, Oliver Gill and LaToya Harding) shows that the mighty BAT – the largest listed tobacco company in the world – has cut full-year vaping targets and overall profit growth due to problems in Japan and the US and adverse currency movements respectively. * SO WHAT? * The Food and Drug Administration (FDA) is currently looking to crack down on vaping, which could be highly problematic (and possibly terminal) for purer vaping players such as Juul – but could be an unexpected boon for Big Tobacco which has far deeper pockets and a more diversified earnings stream.



And finally, in other news, I propose a toast(ie)…

Here’s to the continued enjoyment of the toasted sandwich! Long may it live! Here’s somewhere to go if you get the urge: Toastie restaurant with completely bonkers fillings to open in UK – would you try any of them? (The Mirror, Robyn Darbyshire

Some of today’s market, commodity & currency moves (as at 0800hrs 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 **
7,076(+0.71%)25,795 (+2.16%)2,810 (+2.15%)7,64511,809 (+1.68%)5,179 (+1.66%)22,871 (+1.48%)2,561 (+0.59%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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