Wednesday 26/09/18

  1. In MACROECONOMIC NEWS, Argentina loses its central banker and the Swedish PM loses a confidence vote
  2. In RETAILER NEWS, Next bucks the trend and Hotel Chocolat looks overseas
  3. In CAR NEWS, BMW has a shocker but Toyota sees a Chinese opportunity
  4. In PHARMACEUTICAL NEWS, AstraZeneca makes progress on a cancer drug and Novartis slims down
  5. In OTHER NEWS, I bring you the world’s first ice-skating dog. For more details, read on…



So Argentina’s central banker leaves at a tricky time and Sweden faces a period of uncertainty…

Argentina central bank chief resigns (Financial Times, Benedict Mander, Pan Kwan Yuk and Colby Smith) heralds a tricky development for Argentina as its central bank chief resigned after only three months in the job. His timing was not exactly ideal as the government was facing down a 36-hour strike called in protest against his new austerity budget whilst simultaneously trying to negotiate a bailout with the IMF! The peso fell 5% on the news, after already falling by over 50% versus the dollar so far this year. * SO WHAT? * This is a nightmare for a country in turmoil. Argentina has turned to extreme measures to arrest the slide of its currency (its interest rates run at 60% currently) but it has not been well-received by the people. Luis Caputo will be replaced by Guido Sandleris, a respected economist. Good luck, son – that sounds like a

nightmare job (although if he manages to turn things around he’ll be a hero).

Swedish prime minister loses crucial confidence vote (Financial Times, Richard Milne) highlights the uncertain situation in Sweden at the moment as the failure of its centre-left PM to win a confidence vote will inevitably lead to a protracted period of negotiation in government. Stefan Lovfen now has the dubious honour of being the first Swedish PM to lose a vote of confidence as the forces of the left and right jockey for position. * SO WHAT? * The anti-immigration Sweden Democrats made a lot of ground in the recent elections and forming a government after that was always going to be a big ask given that two of the four centre-right parties have said that they will not entertain working with them in a coalition. It’s “squeaky bum time” for businesses as they believe that a weak government coalition just won’t be able to bring in any proper reforms. We will just have to sit on the sidelines and wait to see what comes out of this situation and whether a government can be formed. If it can’t be, then the Swedes will have to go to the polls again in quick succession.



In retailer news, Next puts in a solid performance and Hotel Chocolat aims at overseas expansion…

Next is ray of sunshine in high street gloom (The Times, Callum Jones) shows the clothing retailer bucking the trend of high street gloom as it increased its annual profit forecast and confounded expectations of weak summer sales. This positive surprise powered the shares up by 8% in trading yesterday. The company aims to more than double investment in digital marketing this year whilst halving expenditure on direct mail, print and TV advertising. It is also investing in warehouse capacity to service increasing online sales. * SO WHAT? * This is great news in a difficult time for the sector and it sounds like the company is doing the right things in order to survive for the long term. All it needs now is for punters to continue buying their clothes! I do think that whole Next Directory

thing is rather dated, though – so surely that’ll have to be on the chopping block at some point.

Hotel Chocolat expands abroad in bid to be a ‘global leader’ (Daily Telegraph, Jack Torrance) highlights the success of the chocolatier which has managed to increase its margins and profits despite ingredients prices going up (weak pound) and challenging market conditions. It is due to open its first shop in the US on New York’s Lexington Avenue and also has franchise partners in Japan and Scandinavia. Chief exec and founder Angus Thirlwell wants the company to become the “global leader in premium chocolate” and says that “we’re not going to do that by sticking to East Anglia, so we need to get out there and get our start-ups in those countries really working and growing”. * SO WHAT? * Good luck to them. All I would say is that over-hasty overseas expansion has led to the untimely death of many a company. As long as Hotel Choc expands sensibly, keeps an iron grip on supply and quality then I am sure it will do well – after all, the product’s great isn’t it!



In car news, it seems that there are contrasting reactions to Trump’s tariffs shown by BMW and Toyota…

In Profit warning adds to BMW’s problems (The Times, Robert Lea) we see that Trump’s tariffs are being blamed for BMW’s profit warning yesterday in an unscheduled trading statement. It said that “the continuing international trade conflicts are aggravating the market situation and feeding uncertainty. These circumstances are distorting demand more than anticipated and are leading to pricing pressure in several automotive markets”.

On the other hand, Toyota finds a silver lining in trade

war crisis (Financial Times, Kana Inagaki) shows that the Japanese car maker is preparing for a major push into China as the US market continues to look increasingly difficult. It is going to share technology and expertise in building hybrid vehicles with Chinese companies in response to a request from Beijing. Interestingly, Toyota has done well in the China market recently with Lexus sales up by 59% to a monthly record on China cutting tariffs and its “Toyota” sales were also up by 23%. * SO WHAT? * This is probably a good strategic move by Toyota as long as their Chinese partners don’t nick their tech like they have been known to do in the past. China wants to be the world leader in electric vehicles by 2025 but it also acknowledges the need for hybrid technology – which is where Toyota comes in. Relations between China and Japan are always up and down, so as long as they are “up” more than they are “down”, this could be a good move.



In pharmaceutical news, AstraZeneca makes some important headway in its cancer treatment and Novartis makes cost cuts…

AstraZeneca shares surge as cancer drug cuts deaths by a third (Daily Telegraph, Julia Bradshaw) heralds a really important development for its cancer drug Imfinzi, which was shown at the World Conference on Lung Cancer to cut the risk of death in patients with stage-three lung cancer by 32%. This drug is the only one of its type that is approved for stage-three lung cancer as others concentrate on later stages. * SO WHAT? * AstraZeneca needs this drug to succeed as a lot of its older oncology drugs are getting close to patent expiry. The company

hopes that by proving higher survival rates for earlier treatment that regular screening for lung cancer will be as commonplace as screening for breast cancer. The five-year survival rate for stage-four lung cancer is only 6%, whereas the survival rate for stage-three is 15%.

Elsewhere in the pharmaceutical sector, Hundreds of jobs to go as Swiss drugs firm pulls out of Grimsby (The Guardian) highlights the consequences of Novartis’ cost-cutting plans as it announced 1,700 job losses in both the UK and Switzerland in moving away from high volume pharmaceuticals to more specialised treatments. * SO WHAT? * This sort of thing is tough, but happens a lot in the pharma sector where companies change emphasis all the time. This is Novartis’ latest move in its bid to change focus as, earlier this year, it sold off its stake in a consumer healthcare business to GlaxoSmithKline for $13bn, which included a raft of brands such as Panadol, Sensodyne and Nicotinell.



…And finally, in other news…

I thought I’d leave you today with this great story about a rescue dog who’s gone on to develop some serious skills: ‘World’s first’ ice skating dog looks like he’s loving life after almost being put down (The Mirror, Ailbhe MacMahon & Neil Murphy Ahhhhhh!

As always, thank you for reading Watson’s Daily!

Some of today’s market, commodity & currency moves (as at 0805hrs 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 **
7,508 (+0.66%)26,492 (-0.26%)2,916 (-0.13%)8,00712,375 (+0.19%)5,479(+0.05%)23,996 (+0.26%)2,804 (+0.81%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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