Wednesday 19/10/22

1. In MACRO & ENERGY NEWS, Jeremy Hunt targets banks, Truss faces more humiliation, Macron is trying to stave off humiliation, French utilities warn of a dark winter and the EU tries to address the energy problem
2. In CAR-RELATED NEWS, Foxconn’s car ambitions deepen, Rolls-Royce’s first 100% electric vehicle is unveiled, Shell gives up on hydrogen for cars and Lookers forecasts bumper profits
3. In TECH NEWS, Apple launches new product, Meta is forced to sell Giphy, Microsoft cuts headcount, Netflix stems the losses and Amazon’s workers reject unionisation
4. In REAL ESTATE & FINANCIALS NEWS, real estate investors eye bargains, Bellway expects poor sales, Goldman Sachs de-emphasises retail banking and Panmure makes an offer for a rival
5. AND FINALLY, I bring you an unusual sleeping bag…

So the dismantling continues, Macron faces challenges and European energy stays in focus…

Jeremy Hunt lines up raid on bank profits to help fill £40bn UK fiscal hole (Financial Times, George Parker, Jim Pickard, Emma Dunkley, Siddharth Venkataramakrishnan) shows the next stage of the new Chancellor’s open-heart surgery on the economy. He is looking to take a share of the profits of banks and energy companies to fill a gaping £40bn fiscal hole along with other tax rises and public spending cuts. Hunt will be announcing a Budget on October 31st. * SO WHAT? * Given that banks are expected to make a ton of money because of higher interest rates (the gap between what they charge borrowers and what they pay out to savers can be much wider than it is when interest rates are bumping around zero), this sounds like a reasonable plan. It sounds like Halloween this year is going to be particularly shocking. And I’m not talking about the costumes…

The nightmare continues for the PM in Liz Truss to face Commons in renewed leadership test (Financial Times, Sebastian Payne, George Parker and Jim Pickard) as she is going to be facing the House of Commons today for the first time since Trussonomics was effectively consigned to the dustbin. She will be doing prime minister’s questions – and I’m sure that everyone will be lining up with the popcorn to watch the fireworks. I suspect it’ll be a bit like watching one of David Attenborough’s nature programmes where a pack of wolves stalks and taunts its prey and then goes in for the kill. Uncomfortable to watch, but compelling nonetheless. It seems that the mood has calmed down and now it seems that senior MPs reckon Truss should be left in place until after Hunt delivers the Budget on October 31st. I would agree with that. I just don’t see the sense in having even more upheaval at such a fragile stage.

Over on the Continent, Macron government to force French budget through parliament (Financial Times, Leila Abboud) highlights the French president’s desperation to force his 2023 budget through by

using a rare constitutional move – using article 49.3 that overrides the need for a parliamentary vote (although it allows the opposition to respond with a motion of no-confidence). * SO WHAT? * He lost his massive majority in the June legislative election and is clearly worried that he won’t be able to get his proposals through against a more powerful opposition. Things are difficult enough at the moment with strikes all over the place but Macron is fast-realising that if he wants to get things through, he has to do it with the backing of Les Republicains (LR) and/or Le Pen’s far-right National Rally (NR). This just shows that he is going to have a very hard time in future in getting through any kind of reforms.

Talking of strikes, French told that dark winter looms if strikes continue (Daily Telegraph, Oliver Gill) shows that the French equivalent of the National Grid, the Reseau de Transport d’Electricite (RTE), says that ongoing strikes have already postponed a number of nuclear reactor restarts by weeks and that nuclear output for the first fortnight in November would be lower than previous forecasts. EDF, now state-owned, only has 29 of its 56 reactors online as the others are out for maintenance. * SO WHAT? * Outages could result in France but there could also be consequences for the UK as it is possible that France could potentially divert shipments of LNG, meaning that we will go short…

EU aims to limit gas price surges with latest emergency package (Financial Times, Alice Hancock) shows that the European Commission has announced a new package of measures to limit energy prices, with more to come next year. It wants to introduce a controversial cap on the price of gas traded on the EU’s main exchange for gas and limit volatility in derivatives markets. It also wants to streamline the EU’s gas buying process. * SO WHAT? * Wow! This really does seem to be a major power-grab by the EU and you do wonder whether reforms made under difficult circumstances will stand up to scrutiny when the dust eventually settles.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Foxconn furthers its EV ambitions, Rolls-Royce comes out with a new EV, hydrogen takes a blow and Lookers cashes in…

In Foxconn aims to supply nearly half of world’s EVs (Financial Times, Kathrin Hille) we hear that Foxconn, the Taiwanese contract electronics manufacturer most closely associated with assembling Apple’s iPhones, has plans to make almost half of all EVs sold globally over the long term as it continues its strategic diversification into cars. Shorter term, it is growing relationships with car manufacturers and aims to gain a 5% market share of the global EV market by 2025 that could be worth $31bn in revenues. * SO WHAT? * If Foxconn manages to follow through on its ambitions, this could be transformational for the company as all of its car business would actually be outside China! Foxconn: electric car supply chain highlight risks to core Apple business (Financial Times, Lex) says that the move makes a lot of sense because a) assembly and contract manufacturing has wafer thin margins and b) it gets it out of China (fun fact: its Zhengzhou iPhone manufacturing base employs around 350,000 people!) as electric car-related production is mostly based in Taiwan, Thailand and the US, which will no doubt come in rather handy given the ongoing frosty US-China relationship. I think that this is fascinating!

Meanwhile, The electric dream has arrived for Rolls-Royce (The Times, Robert Lea) highlights the unveiling of the new 100% electric Rolls-Royce Spectre, a two door vehicle with a 320 mile range but because of its batteries, it will be even heavier than its 4×4 monstrosity, the Cullinan. Despite the fact that its cost will be north of £300,000 the BMW-owned company reckons that it will account for 20% of its production by the end of 2024 (well,

apparently Rolls-Royce owners have seven cars on average – so money shouldn’t be a problem!). It aims to be a fully-electric marque by 2030. Fun fact: when BMW bought Rolls-Royce only 20% of the owners drove their own cars – that figure is now 80%!

Shell shuts hydrogen fuel stops as the low-carbon technology stalls (The Times, Emily Gosden) shows that Shell has shut all of its hydrogen car refuelling stations in Britain (a grand total of three service station sites in Cobham, Gatwick and Beaconsfield), blaming lack of hydrogen-powered cars. The site were opened between 2017 and 2019 and Shell had even looked at opening three more sites by the end of 2021. * SO WHAT? * Despite hydrogen-powered cars being quicker to refuel and having a longer range than battery-powered vehicles, they just haven’t caught on. There are currently only a few hundred hydrogen-powered vehicles on British roads currently, just 12 were sold last year and only 7 have been sold so far this year! On the other hand, over a million plug-in EVs have been sold in Britain so far while almost 250,000 of those being sold this year. Shell’s closures means that there are now only 11 hydrogen refuelling stations in Britain versus over 57,000 chargers at 20,000 locations for EVs. Interestingly, they still see hydrogen as having potential for lorries.

Meanwhile, Lookers cashes in as high inflation boosts car prices (The Times, Robert Lea) shows that rising new and used car prices are boosting profits at Lookers, the car dealership, helping to boost its share price by 16.5%, contrasting with the initial sell-off it suffered in the wake of the mini-Budget. The company said that the lack of new cars was limiting its growth but it also acknowledged likely consumer reticence on spending on vehicles as the cost-of-living crisis hits.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Apple unveils new product, Meta is forced to sell Giphy, Microsoft cuts headcount, Netflix stems the outflow and Amazon’s workers vote against unionisation…

Apple launches revamped iPad in time for Christmas (The Times) highlights Apple’s unveiling of a new version of the iPad along with an update to its iPad Pro line-up as part of the latest round of new gadget annoucements. They will be available from October 26th. * SO WHAT? * This is all lovely and all, but it will be interesting to see whether customers will continue to be willing to pay top dollar for the latest gadgetry or whether they will just stick with what they have for longer…

Facebook owner Meta to sell Giphy after UK watchdog confirms ruling (The Guardian, Mark Sweney) heralds a rare victory for regulators as the UK’s Competition and Markets Authority has managed to force the mighty Meta to sell gif creation website due to competition concerns. Meta had appealed the decision and there was a subsequent investigation, but now it has decided to accept the decision, sell Giphy and move on. The CMA argued that the acquisition was anti-competitive and that if it had gone ahead it would have eliminated a potential competitor from the £7bn UK display advertising market. Incredibly, Meta said that “We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter”. * SO WHAT? * This is the first time that the CMA has blocked a Silicon Valley deal. Wow! I would have thought that regulators worldwide will rejoice in this rare win. Will this embolden others in their assorted punch-ups with Big Tech??

Continuing on the theme of Big Tech, Microsoft lays off employees after slowdown in earnings growth (Wall Street Journal, Aaron Tilley) shows that the trend of tech companies cutting staff is continuing as the repercussions of Microsoft experiencing its slowest earnings growth in two years bites. Twitter, Netflix and Uber have been among the many to reduce headcounts as even the mighty tech sector is not immune to tricky macroeconomic factors.

On the positive side, Netflix reverses subscriber decline with help from Stranger Things and Dahmer (The Guardian, Dominic Rushe) shows that Netflix managed to add 2.4m new subscribers in the latest quarter, which was about double expectations! This came as welcome news to a company that had seen two successive quarters of subscriber decline. * SO WHAT? * This is great news for the company whose subscriber numbers should be further boosted by the newly-announced ad-supported cheaper subscribtion option. All it needs now is the second series of Squid Game to drop 😁.

Then in Amazon workers reject union in vote at upstate New York warehouse (Wall Street Journal, Sebastian Herrera) we see that the strenuous efforts of management to stop the workers from unionising has worked (at least for now). * SO WHAT? * This will be no doubt celebrated by the management as unionisation will entail extra ongoing costs that it will want to avoid. It is a blow for worker rights and I am sure that Starbucks will be taking note, given that it is in a similar position.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Real estate wobbles and financials shenanigans…

In a quick scoot around other interesting stories today, Real estate investors circle as property funds offload offices and warehouses (Financial Times, George Hammond, Joshua Oliver and Adrienne Klasa) highlights the consequences of property funds experiencing major levels of fund withdrawals. * SO WHAT? * The sudden demand for redemptions is forcing them to sell assets quickly (which means they have to sell at cheaper prices), giving larger asset managers and cash-rich private investors a lot of opportunities. British Land joins sale rush (The Times) reinforces this as the London-based property group is just one of many landlords planning on selling some of its London buildings. It looks like Goldman Sachs’s predictions for the commercial property market are coming true…

In residential property, Housebuilder Bellway expects sluggish sales as interest rates rise (The Guardian, Julia Kollewe) highlights the latest housebuilder to say that sales momentum is slowing down as macroeconomic issues hit hard. It said that demand for houses has slowed down since the summer and expects sales to be pretty flat over the next year.

Then in Goldman Sachs pulls back from retail banking in latest overhaul (Financial Times, Joshua Franklin) we see that Goldman Sachs is reining back its push into commercial banking as part of its overhaul. It is folding in its retail banking unit in with its wealth management division as it said it was streamlining the business whilst it announced a 43% drop Q3 net income, its fourth consecutive quarter of decline. Goldman Sachs: we need to talk about Marcus (Financial Times, Lex) looks at the realignment which brings four divisions down to three. The first one will comprise of asset management, wealth management and Marcus (its retail offering); the second will be made up of its core investment banking and trading business; the third will be Platform Services, which will be the place for the company’s new offerings that go beyond consumer finance. * SO WHAT? * The realignment was needed but it remains to be seen whether this will smooth earnings that are driven by notoriously volatile earnings from the investment banking and trading businesses.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I think we’ve all seen promo items before, but I think this one struck me as being pretty unique: Fried chicken sleeping bags to be awarded to 500 lucky Mos Burger customers (SoraNews24, Master Blaster). Yes, it’s a Japanese burger chain offering these weird sleeping bags to promote their fried chicken offering 🤣🤔. TBH, if the chicken is anything like their burgers (which are excellent), the effort will be worth it 👍.