Friday 28/01/22

1. In MACROECONOMIC NEWS, we look at Russia sanctions, China’s backing and support from Ukraine (but not Hungary) while the US unveils strong economic growth and an attack on inflation that could have UK consequences
2. In CONSUMER/RETAIL TRENDS NEWS, consumers are spending on luxury and booze while in the UK they are still spending on property and holidays while M&S tries something new, Mastercard benefits whatever we do and high streets get livlier
3. In AUTOMOTIVE NEWS, we get more detail on the Renault/Nissan/Mitsubishi alliance, Tesla’s key to success and laws on self-driving
4. In MISCELLANEOUS NEWS, Apple rakes it in, Mondelez says it’ll be increasing prices and Robinhood takes a tumble
5. AND FINALLY, I bring you two great life hacks…

So the Russia/Ukraine situation continues to develop, America has decent economic growth and designs on combatting inflation which could dent the UK…

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New Russian gas projects face sanctions if Ukraine attacked (Financial Times, Henry Foy, David Sheppard and Laura Hughes) shows that the UK and EU are trying to crank up the pressure on President Putin by imposing targeted economic sanctions that are backed by the US

while China backs Russia’s ‘security concerns’ in crisis with west over Ukraine (Financial Times, Eleanor Olcott, Demetri Sevastopulo and James Politi) shows that China is backing its comrade in current events and calling for the abandonment of “the cold war mentality” and engagement in “balanced” negotiations. Ukraine neighbours embrace Nato help but Hungary expresses doubts (Financial Times, Marton Dunai and James Shotter) shows that Ukraine is obviously supporting NATO but Hungary is not given that it is generally pro-Moscow and anti-Kyiv. It wants to “avoid a new cold war” and for both sides to engage in talks rather than troop build-up.

Meanwhile, America beats expectations with best economic growth in decades (The Times, Callum Jones) highlights strong performance of the US economy in Q4 as its annualised rate of GDP grew at 6.9%, beating expectations of 5.5%. This was a major increase on the previous quarter but it does face more headwinds from now on in the form of rising Covid infection rates and ongoing supply chain problems. Still, with inflation continuing to rise ‘No more Mr Nice Guy’: Fed chair signals tougher stance on inflation (Financial Times, Colby Smith) further underlines the stance of the Federal Reserve, which is now increasingly minded to raise interest rates sooner rather than later – and potentially at quite a rapid pace. * SO WHAT? * This sounds pretty reasonable, given the circumstances, but Fed rate hint pushes Britain’s borrowing costs to ten-year high (The Times, Arthi Nachiappan) shows that all this talk of rate rises in the US is pushing up our borrowing costs – and I have already mentioned the potential effects of a US interest rate rise could have on poorer countries.

Consumers spend on bling, booze, property and holidays while M&S tries something new, Mastercard does well whatever and high streets liven up…

LVMH posts record figures amid luxury spending boom (Daily Telegraph, Giulia Bottaro) shows that the stable of bling that is LVMH (with the likes of Fendi, Christian Dior, Louis Vuitton, Tiffany etc.etc. under its wing) posted record sales and bumper profits that were double 2020 and 49% higher than 2019, with particularly strong performances in the US and Asia. Patriotic Generation Z fuels pandemic-era jewellery boom in China (Financial Times, Chan Ho-him) stays on the bling thing as China’s biggest jewellery retailer Chow Tai Fook wants to surf the wave of money enjoyed by Gen-Zs who seem to be increasingly interested in domestic brands. Millennials and Gen Z customers accounted for over 56% of sales for the company’s “heritage collection” between April and September 2021. * SO WHAT? * It really does seem like consumers are very willing to spend at the moment. Presumably, further up the wealth scale, there is less concern about the potential ravages of inflation, but consumers can’t be insulated from this forever. Having said that, I think that once the “revenge spending” starts to fade, the lifting of travel restrictions and having more people fly/sail around the world again will give another lift to sales as rich tourists resume overseas shopping trips.

Elsewhere, it seems that consumers are hitting the bottle, as per Diageo sales pass pre-Covid levels (Financial Times, Alistair Gray), which shows that the beverages company has benefitted greatly from customers buying spirits to make cocktails at home – and in the UK, people are spending money on houses – as per TSB returns to profit on record mortgage demand (Financial Times, Siddarth Venkataramakrishnan) –  as well as holidays – as

per UK travel industry forecasts summer boom amid surge in bookings (The Guardian, Mark Sweney and Gwyn Topham) , which highlights EasyJet’s high hopes for the summer (similar to what Wizz was saying yesterday) and Saga’s strong bookings for cruises from August 1st. * SO WHAT? * It’s great to see that consumers haven’t shut their wallets just yet, but there is a danger that confidence could evaporate if pressure on household budgets doesn’t abate soon and people start to take action because their wages aren’t keeping pace with inflation (i.e. they stop spending).

On the retail front, M&S hopes young will buy in to ‘live shopping’ smartphone service (Daily Telegraph, Ewan Somerville) shows that M&S is going to launch a new generation of teleshopping – using influencers on a live video stream. Shoppers will be able to interact with them and “buy the look” in real time. * SO WHAT? * Live shopping really took off on TikTok last month, but this kind of thing has been popular in China for ages. I think it’s high time that it took off over here, and it just goes to show how far M&S has come from its rather conservative outlook to being something that pushes boundaries. The rehabilitation of M&S continues!

Mastercard: payment processors win most from return of credit card spending (Financial Times, Lex) underlines how well Mastercard is placed to take advantage of the credit card spending boom as it makes most of its money from processing credit card and cross-border payments. Lending is actually a relatively small part of its business, which means that when there is a downturn it doesn’t have huge exposure to cardholders who miss payments. Along with its bigger rival, Visa, it looks well-positioned to take advantage of consumers spending more on their plastic!

One happy result of more people shopping manifests itself in Number of boarded-up shops finally starts to fall (The Times, Tom Howard) as new data from the British Retail Consortium shows that the number of shuttered stores in high streets and shopping centres has fallen for the first time since the start of 2018! The first drop in vacancy rates for almost four years implies that our high streets maybe coming back to life again! Hooray!

We get more details on Renault/Nissan/Mitsubishi, the key to Tesla’s ongoing success and laws on self-driving…

Further to what I said earlier on this week about an EV alliance between Renault, Nissan and Mitsubishi, Renault-Nissan alliance plans €23bn investment in electric cars (Financial Times, Peter Campbell, Sarah White and Eri Sugiura) puts a bit more flesh on the bones to what I highlighted on Monday, saying that they want to produce 35 new electric car models by 2030 by sharing five production systems. They are up against intensifying competition, not to mention Tesla, which announced stellar results this week. Mind you, I think that Tesla: production, not new products, will drive its stock (Financial Times, Lex) makes the very valid point that Elon’s company should concentrate on increasing production of what it’s got rather than get distracted by the rolling out of models like the delayed Cybertruck and a previously-promised $25,000 car.

Further to what I was saying yesterday about law concerning self-driving vehicles, I thought that it was interesting to note that Laws target false ‘self-driving’ claims (Daily Telegraph, Howard Mustoe) shows that the Law Commission is considering making use of the term “self-driving” a criminal offence if there is still human input. It argues that motorists could be misled into thinking they can completely switch off by over-emphasising the self-driving capabilities of their vehicles and that ambiguity needs to be tightened. * SO WHAT? * As I said on yesterday’s podcast, I really think that the only practical way I can think of getting driverless cars on the road whilst minimising legal blow-back is to have ACTUAL driverless cars where there are no steering wheels/controls because that way any accidents really cannot in any way be attributed to the human occupants. However, the problem is – how many people are going to be willing to let a truly driverless car drive them anywhere other than around an abandoned car park??

Apple announces record sales, Mondelez warns of higher prices and Robinhood suffers the slings and arrows of outrageous markets…

It’s been a good week for Apple, what with it regaining its #1 spot in China – but Apple avoids chip crunch with $124bn record sales (Daily Telegraph) just caps things off quite nicely as the company announced record sales and profits thanks to booming demand for its iPhones and its growing services business (made up of the App Store, Apple Pay etc.). Onwards and upwards??

Mondelez mulls more price hikes for snacks as inflation eats into profits (Wall Street Journal, Annie Gasparro) echoes what P&G said last week – that prices for its goods were going to rise to take into account rising ingredients costs, freight rates etc. – bad news for consumers.

There was also disappointing news for retail traders in Robinhood’s stock drops 12% after loss is worse than analysts expected (Wall Street Journal, Caitlin McCabe) as many punters’ platform of choice got a kicking yesterday after reporting a hefty $423m loss in Q4. It was blamed on higher tech and administrative expenses but, on the flipside, it saw an 89% rise in revenues for the year. Is this growth going to be sustainable and will it be able to reduce its losses?? Where are all the Redditors when you need them, eh??

…in other news…

I thought I’d bring you some great life hacks today! I’m usually pretty sceptical of “tips and tricks” but I think that Woman shares trick to drying clothes without a tumble dryer in just two hours (The Mirror, Paige Holland) is definitely worth a go and when I saw Your iPhone has hidden alarms that aren’t as ‘triggering’ as the default tone (The Mirror, Paige Holland) I had a lightbulb moment! This sounds like a much more civilised way to wake up!!! On a serious note, I get up at 4am every day to write Watson’s Daily and I find that waking up so suddenly (because the alarm on the iPhone is pretty brutal!) during weekdays makes it harder for me to get back to sleep when I wake up on weekends and want to get back to sleep. I think this is because I have to “switch on” straight away during the week. Anyway, I’m definitely going to give this a go!