Wednesday 19/08/20

1. In MARKETS & MACROECONOMIC NEWS, new highs divide opinion while Germany extends furlough
2. In HIGH STREET/RETAILER NEWS, Pizza Express closes 73 sites, Asda unveils stellar online performance, Walmart powers through, M&S announces drastic changes and Amazon offers Morrisons’ full range
3. In TECH NEWS, Huawei faces real difficulties and Oracle gets involved in the TikTok frenzy
4. AND FINALLY, I bring you the best campervan ever!

So markets heat up and Germany extends furlough…

US stocks set record after powerful rebound from March low (Financial Times, Colby Smith, Richard Milne and Adam Samson) highlights the S&P500 hitting an all-time high in trading yesterday, meaning that it has shot up by a whopping 52% since the lowest point of lockdown on March 23rd. It smashed through the intraday high of 3,395 – which was the previous record high set in February – and closed at a new record. Asia stocks edge higher after Wall Street’s S&P500 hits record (Financial Times, Hudson Lockett) shows that the feelgood spread to Asian markets but then Norway’s oil fund fears market disconnect from real economy (Financial Times, Richard Milne) shows the world’s largest sovereign wealth fund voicing concerns over the increasing disconnect between the financial markets and the real economy. Record low interest rates and massive market stimulus around the world have helped markets to power out of the massive rut they were in at the lowest point of the outbreak. Concerns aside, the performance of the $1tn oil fund had its second best quarterly performance ever and is now flat to slightly up on the year overall. On the other hand, Compile a ‘happy list’ and markets do not look so crazy (Daily Telegraph, Tom Stevenson) has some great advice for market watchers, saying that you must always argue the case for the opposite of what you feel. If you think markets are going to be great, you need to think about the risks. If, on the other hand, you are pessimistic, you need to look for the upside potential. * SO WHAT? * The bull argument is that the world’s economy is on the path to recovery and Goldman Sach’s head of global investment research, Jan Hatzius, believes that we’ve already made up about half of the 17% GDP decline between January and April. Also, the full lockdown we saw is unlikely to be repeated as other cheaper ways of containing the virus are now being used. Tech and healthcare are likely to be strong and, of course, there is increasing optimism that a vaccine will be found. Looking at the charts, there are parallels to be drawn between what happened to the markets in the aftermath of the 1930 stock market crash and the 2009 financial crisis. In 1930, stocks recovered only then to fall again for three years – but in 2009, there was a huge amount of fiscal and

monetary support which powered an 11-year recovery. What we are experiencing now is more akin to 2009. The bear argument would point to a potentially shaky recovery that is reliant on only a very narrow set of sectors – with tech being the main one – hiding the ongoing failure of huge swathes of businesses. As things stand, governments are spending massive amounts of money to avert unemployment carnage and other business life support and so it is actually hiding the true underlying state of affairs. What do YOU think?

Germany to extend furlough to 24 months (The Guardian, Philip Oltermann) heralds a potentially major development as German chancellor Angela Merkel has indicated that she is positively disposed to extend the current scheme from 12 to 24 months, which lets firms put staff on part-time work to reduce costs. A final decision on the extension is expected on 25th August. As Germany extends furlough, Sunak wants UK to embrace change (The Guardian, Richard Partington) contrasts the situation between the UK and Germany and highlights the differences in the structure of the furloughing initiatives. The UK Job Retention Scheme (JRS) has involved the government paying 80% of the wages while workers stayed at home at the peak of the scheme and will start to tail off until October – so there is an impending sense of urgency about what Sunak’s next move will be. In Germany’s Kurzarbeit scheme, the government pays at least 60% of wages for the time that a worker is not working but employers can pay staff for the remainder of their usual hours if they work them. The National Institute of Economic and Social Research believes that extending the current UK scheme until the middle of next year would cost “only” £10bn and could pay for itself by keeping unemployment benefit claims low and help furloughed workers to continue spending and paying taxes. Sunak will also be hoping that the £1,000 per employee job retention bonus that goes to employers for keeping staff on until January next year will also give businesses extra incentive. A job creation scheme, retraining grants and more staff at job centres are some of the other measures available. * SO WHAT? * Crunch time is coming on both a second wave and an expected employment crisis. Sunak and his team have to decide the lesser of many evils regarding the balance between infection risks and the health of the economy. Now that we have more data available and the “luxury” of seeing how different systems in other countries have worked I hope that Sunak is better-equipped to make the best decisions he can!

Pizza Express closes outlets, Asda and Walmart do well, M&S announces big changes and Amazon expands its Morrisons range…

Struggling Pizza Express to close 73 sites (Daily Telegraph, Hannah Uttley) shows that the company confirmed it would be closing 73 sites and cutting 1,100 jobs as part of efforts to secure the long term future of the business. The company has now launched a Company Voluntary Arrangement (CVA) in order to support its finances. Although the chain had mostly been trading profitably going into lockdown, it had been struggling with rising costs and over-expansion. The tough times continue…

In Asda hits online levels expected within eight years in just weeks (Daily Telegraph, Simon Foy) we see that Asda plans to continue with the expansion of its online delivery capability due to it witnessing a “structural shift” in customer shopping habits in both delivery and click-and-collect. It will be extending its partnership trial with Uber Eats to 25 additional stores over the next two months while same-day and express click-and-collect will return to over 300 stores after being suspended at the peak of the outbreak. Walmart flexes its scale to power through pandemic (Wall Street Journal, Sarah Nassauer) highlights a strong quarterly performance from Asda’s parent company as its e-commerce business almost doubled with revenues shooting up by 97% from a year ago. * SO WHAT? * Grocers continue to benefit from the pandemic and have more data to work with to help them in positioning themselves for any future outbreaks and permanently-changed consumer behaviour.

Then in Crisis forces M&S to pull the trigger on drastic move (The Times, Ashley Armstrong) we see that M&S has

decided to cut 7,000 jobs as part of an effort to turn things around at the ailing high street stalwart. Coronavirus has highlighted previous shortcomings in a bloated store portfolio, a silo culture, outdated and inefficient online offering, among many other things. M&S is now accelerating a strategy of moving away from high streets and shopping centres that rely a lot on passing trade and towards retail parks where families can park for free and spend more time. * SO WHAT? * This is a really interesting shift IMO as retail parks have been the best performers in bricks-and-mortar retail, according to Springboard, while shopping centre nightmares have decimated the likes of landlords Intu (fell into administration in June) and Hammerson (launched an emergency rights issue to keep the party going). Although retail parks are criticised by some as joyless places, the stats are saying different and it is up to management to get the next steps right otherwise there will be more carnage. Retail is the UK’s biggest private sector employer currently and it is the third biggest employer of women – so everyone will be monitoring progress very very closely.

Meanwhile, Amazon places full Morrisons range on website (The Times, Ashley Armstrong) shows that the e-commerce behemoth is stepping things up in the UK as Morrisons is now on its main website. This will give millions more customers access to free same-day deliveries. Amazon Prime customers will be able to get same-day deliveries on orders of over £40 and have access to everything Morrisons has to offer rather than the limited range available up to now. The new Morrisons on Amazon service will start off in Leeds, but I expect that this will then be rolled out elsewhere. * SO WHAT? * I think this is a MAJOR move and will be a massive boon for Morrisons. It makes Tesco’s recent move to scrap delivery charges for Clubcard Plus holders like p!ssing in the wind 😂. It will also make Amazon a much more serious contender for the UK’s supermarkets.

Huawei continues to suffer and Oracle throws its hat in the ring for TikTok…

Chip and phone supply chain shaken as Huawei faces mortal threat (Financial Times, Kathin Hille, Edward White and Kana Inagaki) shows that fears are increasing that the new tighter restrictions on doing business with Huawei will potentially cause massive disruption in the global chip and smartphone industries given that they effectively amount to a blanket ban on Huawei. * SO WHAT? * Tech analysts around the world are now saying that the latest restrictions will mean that its mobile phone business could disappear – pretty amazing if you consider that it is close to being the biggest handset maker in the world – as well as its 5G

network equipment business. China has thus far not retaliated – and Apple will surely be in the crosshairs, as will Qualcomm.

Meanwhile, Oracle in talks with TikTok that could hijack Microsoft bid (The Guardian, Alex Hern) shows that another US tech company is getting involved in the TikTok frenzy, Trump expresses support for Oracle to buy TikTok (Wall Street Journal, Aaron Tilley and Georgia Wells) highlights Trump’s support for his BFF Larry Ellison – who is a major Trump fanboy and chief exec of Oracle – but  Oracle/TikTok: glory hunter (Financial Times, Lex) strikes a sceptical tone regarding Oracle’s chances. It argues that the rationale for such tech giants is rather sketchy given their core businesses but at least Microsoft has some social media experience with LinkedIn as well as exposure to the “yoof” market in the Xbox brand. Oracle has b*gger all in this regard. The drama continues.

…in other news…

I thought I’d leave you today with the most fantastic campervan ever in Man transforms van into jaw-dropping luxury camper worth £39K during lockdown (The Mirror, Paige Holland). How superb is this?!? I think it could do with a more interesting paint job on the outside, though!