Wednesday 16/02/22

1. In MACRO & OIL NEWS, Putin continues dialogue so stocks rise and oil eases while shale producers are tempted and US producer prices rise, the Eurozone suffers from rising energy costs and Japan’s economy grows
2. In CAR-RELATED NEWS, average used car costs hit £20k, the car industry calls for a charging point plan, Britishvolt attracts yet more money and Luxshare moves into cars
3. In CONSUMER-RELATED NEWS, Airbnb reckons inflation will spark more hosts and “real” wages in the UK are actually better than they were pre-Covid
4. In MISCELLANEOUS NEWS, the UK is ready to demand more from Big Tech while BHP announces a massive dividend
5. AND FINALLY, I show you why it pays to know your plants…

So Putin keeps stirring, inflation continues to bite in the US and Europe while Japan grows…

Vladimir Putin ready for talks on security but keeps pressure on west (Financial Times, Max Seddon, Polina Ivanova, Guy Chazan and Sam Fleming) shows that Russia’s president eased tensions a bit yesterday by withdrawing some troops from the border and Stocks rally after Russia ‘pulls back’ (The Times, Robert Miller) shows that there was a relief rally in European and US markets in response. “Safe haven” assets like gold saw their prices fall and Oil price slides as Putin appears to pull back (Daily Telegraph, Louis Ashworth) shows that concerns about a disruption in oil supplies, due to ongoing Russia/Ukraine tensions, eased sharply. Having said that, although I said recently that American shale oil producers have generally shied away from investing in more production, Oil’s climb towards $100 a barrel tempts US shale companies to shed restraint (Financial Times, Derek Brower) shows that the resolve of companies such as Pioneer Natural Resources, EOG Resources, Diamondback Energy and Devon are all being tested by ongoing high prices. For now, higher development costs, labour shortages, lack of computers and equipment components are all helping to keep that discipline in check – but the strongest deterrent against diving back in to production is still the painful recent memory of over-investment and how that ended up decimating the sector. It sounds to me like if there’s going to be any big increase in oil production to bring oil prices down, it’s going to be coming from OPEC+ rather than the US. The longer the higher prices continue, however, the more the pressure will build.

Meanwhile, inflationary pressures continue to build in US producer prices accelerate in another sign of inflation dangers (Financial Times, Colby Smith) highlights a 1%

rise in the producer price index, which follows the prices businesses receive for their goods and services. * SO WHAT? * This January jump was double what analysts were expecting – it was actually the biggest gain in eight months – and puts even more pressure on the Fed to increase interest rates to curb inflation.

Elsewhere, Rising energy costs push eurozone trade deficit to 13-year high (Financial Times, Martin Arnold) shows that rising energy prices are having a knock-on effect on the Eurozone economy while imports from China rose by a chunky 36.7% in December, taking the bloc’s trade deficit in goods to its greatest level in 13 years. At the same time, the Eurozone’s trade surplus with the rest of the world fell by a whopping 45% versus the previous year! * SO WHAT? * When you’ve got inflation going wild, a central bank that is insisting on doing nothing to curb it and a reliance on Russia for 40% of your natural gas imports and a third of your crude oil imports, things are bound to be tough! I can’t see any reason why this situation will change for the foreseeable future unless the ECB gets off its @rse, the Russia/Ukraine situation gets some kind of resolution and OPEC decides to open the taps.

On the other hand, Japan’s economy expands 5.4% in fourth quarter after Covid curbs eased (Financial Times, Eri Sugiura and Leo Lewis) shows that a relaxation in Covid restrictions helped to boost consumer spending and the wider economy in the last quarter of 2021 as Japan’s GDP rose at an annualised 5.4%, which was a bit short of consensus expectations. Analysts did say, though, that the economy lost steam in December with the advent of Omicron but the good news was that consumer spending, which makes up over 50% of Japan’s GDP, rose thanks to improved performances in the restaurant, entertainment and travel sectors. It is likely, however, that the Omicron effect will become more apparent when Q1 data is announced.

Used car costs rise, the industry wants a charger roadmap, Britishvolt gets more cash and Luxshare ventures into EVs…

Average used car costs over £20,000 (Daily Telegraph, Howard Mustoe) cites the latest figures from Auto Trader which show that the average asking price for a used car has now broken £20,000 for the first time as the ongoing chip shortage continues to dent new cars sales and accelerate the sales of used. This equates to 29% more than it was a year ago, or a bit over £4,000 and is the 93rd consecutive weekly increase. The number of used car sales last year increased by over 12% according to the Society for Motor Manufacturers and Traders although volumes were still 6% less than pre-pandemic levels. * SO WHAT? * I have to say that I’m surprised that sales of used are still going up as I would have thought that those who are doing it to avoid public transport have surely made their purchases already. When people start to drift back to public transport as Covid restrictions continue to lift, the need may fade, chip shortages will ease (meaning that new cars will rise in popularity once more) and people may start to hold back on such purchases as they save up to go electric. For now, though, they remain strong.

Talking of EVs, UK car industry calls for binding targets on rollout of charging points (Financial Times, Peter Campbell) shows that the industry body, the Society for Motor Manufacturers and Traders, is pressing the government to commit to binding targets for installing EV charging points to give punters the confidence to go electric. It also said that there should be a new minister

tasked with overseeing their rollout and make sure that all parts of the UK have access to chargers. * SO WHAT? * The government’s plan to end sales of new petrol and diesel cars by 2030 is looming large and I think that the industry is right to make the government put its money where its mouth is. The more that can be done to reduce range anxiety the better! Given that a third of British households do not have designated off-street parking, an increase in the number of public charging points is something that needs to take particular priority. Fun fact: there is one rapid charging point for every 32 vehicles in the UK – one of the highest levels in the world behind China, South Korea and Japan.

In other developments, Britishvolt secures £200m to build battery gigafactory (Daily Telegraph, Hannah Boland) highlights Britishvolt’s latest success in attracting money to build its EV battery production facility in Northumberland and Luxshare/Foxconn: Chinese AirPods maker is sound proposition for Apple (Financial Times, Lex) shows that China’s Luxshare Precision Industry, once seen as a follower of Foxconn (aka Hon Hai) as an electronics assembler for Apple, is also looking to enter the EV market by moving into EV assembly. It differs in its ambitions to Foxconn, which actually wants to go one step further and become a carmaker in its own right. * SO WHAT? * The competition between Foxconn and Luxshare is interesting as the student looks like it has already become the master as Luxshare’s market value has already surpassed Foxconn’s. FWIW, I think that Foxconn is mad to become an actual carmaker – just look at how long it has taken Tesla to climb the greasy pole to profitability. I think this could be a major long-term drag for the Taiwanese company whereas if Luxshare just sticks to assembly it can continue to grow IMO.

Inflation could increase the number of Airbnb hosts and UK wages actually rise in real terms…

In Inflation may push more families to become Airbnb hosts, chief says (Financial Times, Dave Lee) we see that the company believes that rising inflation could mean that more families become Airbnb hosts in order to boost household finances as it also expects bookings will rebound to pre-coronavirus levels. The chief exec said that guests were reserving summer travel accommodations early this year with bookings for peak months running at 25% higher than equivalent months in 2019. * SO WHAT? * I believe that Airbnb and anything to do with staycations will enjoy another bumper year as increasing pressure on

household budgets may force would-be overseas travellers to continue to holiday domestically. The lifting of travel restrictions should also help with overseas visitor numbers.

It is interesting to see that ‘Real’ wages higher than before Covid (The Times, Arthi Nachiappan) shows that although wages rose by 4.9% in the year to December 2021 versus the 5.4% increase in inflation over the same period, “real” wages – pay that has been adjusted to take inflation into account – are actually quite a lot higher than they were pre-Covid. The latest data from the ONS shows that wages finished last year almost 4% above what they were before the pandemic. * SO WHAT? * Although this may well be the case, it certainly doesn’t feel like it! And I think that perception is sometimes more important than the actual facts. If everyone keeps seeing gloomy headlines and rising food, utility and petrol prices they are likely to spend less freely. 

The UK takes on Big Tech and BHP makes a bumper payout…

In other news, UK Home Office demands Big Tech block ‘legal but harmful’ posts (Financial Times, Tim Bradshaw, Jasmine Cameron-Chileshe and Peter Foster) shows us that the UK Home Office is pressing for power to compel big internet companies to take more responsibility for the content on their platforms. Home Secretary Priti Patel is pushing for changes in the upcoming Online Safety bill, which is being used to crack down on fraud, terrorism and other illegal activities carried out online. * SO WHAT? * It’s all talk at the moment and I’m sure that Big Tech lawyers will try to drag things out for as long as they can. Still, I think that it is long overdue for such companies to take responsibility, and it is important that we move in the right direction on this.

Then in BHP declares record $7.6bn half-year dividend (Financial Times, Neil Hume) we see that the world’s biggest miner has been able to rake in so much profit recently, thanks to rising commodity prices, that it is paying out a massive $7.6bn in dividends to shareholders! BHP is the first of the big miners to report results and it is expected that everyone else will do very well thanks to the ongoing strength in commodity prices.

…in other news…

I really am not into plants or gardening – but maybe I should be as it could pay off handsomely as per Couple who bought B&Q plant for just £12 discover its leaves are worth £170 each (The Mirror, Levi Winchester). Not a bad discovery!