Wednesday 18/09/19

  1. In MACRO, OIL AND TRADE NEWS, Spain heads for another election, Italy’s ex-PM makes a breakaway party, the Netherlands rolls out economic stimulus, the oil price falls and Vietnam continues to benefit from China deserters
  2. In HIGH STREET NEWS, French Connection’s buyer search continues and Thomas Cook files for bankruptcy in the US
  3. In INDIVIDUAL COMPANY NEWS, Amazon offers high-def music streaming, Juul’s sales stop in China and Sirius Minerals is up against it
  4. In OTHER NEWS, I bring you a very hot chip…



So Spain schedules yet another election, Italy’s political scene splinters further and the Netherlands unveils economic stimulus while the Saudis talk a good game and Vietnam benefits from China’s woes…

Continental Europe is not a dull place at the moment! Spain heads for election after Sanchez fails to win rivals’ backing (Financial Times, Daniel Dombey) heralds what will be the country’s fourth general election in four years when Spaniards head for the polls on November 10th after current PM Pedro Sanchez failed to cobble together a workable coalition. Then in Italy’s former PM Matteo Renzi forms breakaway party (Financial Times, Miles Johnson) we see that Renzi is forming his own new centrist movement, splintering Italian politics more than it already is and Netherlands rolls out economic stimulus plan as downturn looms (Financial Times, Mehreen Khan) shows the Dutch government unveiling tax cuts and an investment boost in an effort to avert economic slowdown. * SO WHAT? * Europe is in a right old state at the moment – Germany is suffering hugely from the trade dispute which is making its all-important exports expensive and less competitive, Italy is just all over the place financially and politically – and then there’s Brexit. France and Spain are actually doing quite well but then the whole political instability thing in the latter will be a bit of a drag. The ECB has said it will implement stimulus measures, but has asked for governments that can to spend as well in order to do their bit for the common good – hence the Dutch government’s actions. I know this is being somewhat simplistic, but I really think that if Trump/Xi came to a trade agreement and Europe threw the UK a bone in Brexit negotiations, markets and trade would go ballistic. However, it seems that trade negotiations are just dragging out longer and longer (maybe China is willing to dig in until  

at least next year’s US presidential election?) and Brexit talks just don’t seem to be making much progress as neither side wants to be seen to be backing down. IF there is ANY movement on the latter, I would expect it to be right at the last minute after a lot of posturing and manoeuvering in the background.

After a tumultuous few days, Oil prices fall as Saudi Arabia plays down drone attacks (Daily Telegraph, Russell Lynch) says that oil markets fell on hopes that Saudi Arabia’s oil production could recover more quickly from the weekend’s drone attacks than had originally been thought. New energy minister Prince Abdulaziz bin Salman stated in a press conference yesterday that damage had been “contained” and that some supplies were already coming back online. This contradicted initial assessments that it would take months to get back on track. I bet that your local petrol station will still leave the prices up for a bit anyway, though 😜

Vietnam gains ground in shift from China (Financial Times, John Reed) looks at how Vietnam is currently benefiting from companies moving production out of China. This has already been happening to some extent – Samsung, Canon and Nokia are among those to have contributed to sizeable foreign investment over recent years – but Apple recently began trialing production of Air Pods in the country while Amazon and Home Depot have also increased sourcing recently. However, companies aren’t that keen to disclose too much about their moves to Vietnam for fear of annoying the Chinese but given the country’s record $39.5bn trade surplus with the US last year, you can see that things are clearly hotting up. * SO WHAT? * In theory, this is all brilliant for Vietnam, but the reality of it is that although there is upside to be had, it will be limited by its current scale and infrastructure – plus, it won’t see a sudden influx as supply chains are very complicated and take time to change. Although Vietnam is unlikely to replace China completely as a supplier of choice, it can certainly benefit from being part of a “China plus one” strategy that business leaders are pursuing currently.



French Connection continues its search for a buyer and Thomas Cook scrambles for survival…

In French Connection extends deadline to find buyer (The Guardian, Sarah Butler) we see that troubled fashion chain French Connection has had to extend its deadline to find a buyer until the end of January next year amid continued trading weakness and the second delay of its strategic review that was originally supposed to complete at the beginning of this year. Potential buyers include – surprise, surprise – Mike Ashley’s Sports Direct, which already owns 26% of French Connection, but any deal would have to be approved by founder Stephen Marks, who still owns 41%. The company reported a pretax loss of £3.7m in the last six months on weaker sales and that it had closed eight UK stores, including its flagship on Oxford Street. * SO WHAT? * If I was a potential buyer, I would just wait until this thing gets even cheaper and let the existing management do more clearing out. Ashley always has an eye on a bargain and the brand would probably fit quite well in his portfolio. Still, he doesn’t have an exactly stellar reputation for enhancing brands and his main business – Sports Direct – 

is getting killed at the moment by arch-rival JD Sports. If you also bear in mind that many of his longest-serving trusted lieutenants have been exiting the business over the last year or so, I worry that Ashley is in danger of spreading himself far too thinly. And if that happens, he’ll have no qualms in selling off non-core businesses. Given that he bought many of them very cheaply, he stands a good chance of making some money out of them if he can find any buyers in the current environment. It’s quite sad, really, to see a retailer that was once a leader be reduced to this.

Thomas Cook in US bankruptcy move (The Times, Dominic Walsh) continues its bid for survival  as it filed for Chapter 15 bankruptcy protection in the US, which protects foreign companies from legal action by American creditors in the event of a corporate restructuring outside of the US (it’s the equivalent of Chapter 11, but for non-US companies). This will give it some time to complete a reorganisation. * SO WHAT? * This will help Thomas Cook’s bid for survival as it could trigger an insurance payment on its debt, which will win it support for its reorganisation. The bid continues – but I must say that if I was in the market for a holiday, I would be quite keen NOT to use Thomas Cook right now given its precarious nature. I am sure that I am not alone and think that the longer this drags on the worse it’s going to get for the venerable travel company as potential punters get increasingly nervous about its future.



Amazon goes high-def, Juul’s China sales stop and Sirius faces a serious problem…

Amazon music streaming goes high-definition (Wall Street Journal, Anne Steele) highlights Amazon’s decision to introduce a high-resolution version of its music service that will stream music at a similar quality to CDs or better. In doing so, it will be the first major subscription streamer to offer this. Tidal already offers such capability – but has a relatively small audience – and Amazon hopes that $12.99 per month to Prime members (and $14.99 for non-members) will be compelling enough to attract listeners (especially given that Tidal charges $19.99 per month). * SO WHAT? * Streaming now accounts for 80% of revenue from recorded music, but sound quality has suffered in the meantime. Now that streaming has become ubiquitous, Amazon is betting that the Next Big Thing will be audio quality. It’ll be interesting to see the take-up!

Juul’s sales halted in China, days after launch (Wall Street Journal, Jennifer Maloney) heralds a sudden stop in China sales as its products were taken off and Tmall websites just days after they were launched. Juul’s

vaporisers went on sale early last week online but were taken off by the end of the week with no apparent explanation. * SO WHAT? * Given the hurdles that Juul is facing in its US domestic market, overseas expansion is something that the company is keen to pursue, but incidents like this are clearly going to limit its prospects. There has been no official explanation, but surely this has got a lot to do with the current US-China trade war (although it would be a strange target given that Trump doesn’t seem to be a Juul fan). You could say that Juul’s expansion plans are going up in smoke…

Sirius plan on the brink of collapse as it faces cash crunch (Daily Telegraph, Jon Yeomans) is a story that’s being splashed across many of today’s broadsheets and highlights the travails of Sirius Minerals’ plans to build a fertilizer mine in Yorkshire to open by 2021. Basically, the company needed to sell a $500m bond to get an additional $2.5bn in debt financing from JP Morgan and the government decided not to back it. * SO WHAT? * It is thought that Sirius only has enough cash to survive for six months, so it will wind down construction work near Whitby until it finds a backer. The FTSE250 company’s share price cratered by over 50% in trading on the news yesterday and 1,200 related jobs hang in the balance – not to mention the cash that thousands of retail investors put in to the venture (85,000 private investors make up 50% of its share register!).



And finally, in other news…

I thought I’d leave you today with something to stimulate the senses in The World’s Spiciest Chip Is Sold Only One to a Customer (Mental Floss, Jake Rossen The fact that this snack comes in a coffin-shaped box should be a sign of things to come. The video is hilarious – but not for those who are sensitive to profanity 😂 Why do people do this to themselves?!? 🥵😱🔥🔥🔥🚒👩‍🚒

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Some of today’s market, commodity & currency moves (as at 0841hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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