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HSBC to hire Guyett in wake of ‘mutiny memo’

By Mark Kleinman, City editor

HSBC is to appoint a former JPMorgan banker to a top role in its global investment bank as it seeks to draw a line under a recent mutiny which has raised questions about the future of the unit.

Sky News has learnt that Greg Guyett, who held several senior jobs in JPMorgan's Asian operations, will become co-head of HSBC's global banking in the coming months.

The appointment, which is subject to regulatory approval, is expected to be announced in the coming days, according to insiders.

It will come weeks after an explosive memo written by a group of disgruntled current and former HSBC employees accused senior executives of presiding over a culture of rewards for failure.

The memo, which is now being treated through formal whistleblowing procedures at Europe's biggest bank, was sent to Mark Tucker, HSBC Holdings' chairman, and John Flint, the new chief executive, who is regarded as having a lukewarm attitude to parts of the group's global banking and markets operations.

Mr Guyett will work alongside Robin Phillips, the other co-head of global banking, who was singled out for criticism in the anonymous memo but who retains the support of many of his colleagues.

"The division's leadership has, year-on-year, utterly failed to create a successful strategy," the note said.

"We are entirely fed up and demoralised and have no confidence at all in the existing leadership."

The episode has cast renewed doubts over the strategy of parts of GBM, even as its supporters point to HSBC's leading global position in a number of key areas of financing and capital markets activities.

One source said the appointment of Mr Guyett, who will replace Matthew Westerman, a former Goldman Sachs banker, would form part of efforts to demonstrate HSBC management's confidence in the division's prospects.

Mr Guyett, who has extensive banking experience in greater China, a critical stronghold for HSBC, also had a stint as chief executive of JPMorgan's global corporate bank.

More recently, he worked for Johnson Controls, the US-based technology and industrial group, and then as president and chief operating officer of East-West Bancorp, a California-based commercial lender which focuses on the US and Greater China markets.

In recent weeks, HSBC has announced the appointments of a number of other bankers, including Peter Enns, another former Goldman banker, who will head its global financial institutions group.

HSBC, which declined to comment on Mr Guyett's impending appointment, is one of the lenders best-positioned to exploit growing trade flows between the world's faster-growing economies.

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It also continues to exhibit strong performance in businesses such as cash management and foreign exchange.

The overall GBM operation is run by Samir Assaf, an HSBC veteran.

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Sports Direct counts cost of House of Fraser rescue

Sports Direct has reported a 27% fall in half-year profits as it counted the cost of swallowing up failed department store chain House of Fraser.

The retailer, controlled by tycoon Mike Ashley, said House of Fraser had notched up a loss of £31.5m since it was acquired in August for £90m.

The group also injected £70m into the department store's supply chain and Mr Ashley admitted that he faced "significant challenges" turning around its fortunes.

Sports Direct reported underlying pre-tax profits of £64.4m for the six months to 28 October, down from £88m a year ago.

Mr Ashley said that, stripping out House of Fraser, the group was on course to grow full-year earnings in line with target but that including the department store chain it was set to be behind last year's result.

The Sports Direct chief executive said: "I have made my views clear that I believe the previous House of Fraser senior management team traded the business whilst it was insolvent for a long time.

"This means we have significant challenges ahead in turning House of Fraser around.

"However, I genuinely believe we have acquired a fantastic opportunity and with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the high street."

The company said that it had "spent the post acquisition period working with staff, suppliers, concessionaires and landlords to create a viable business".

Sports Direct bought 169-year-old House of Fraser out of administration in August and Mr Ashley said he aimed to keep open 80% of its 59 stores – though has since said that to do so would be a "godlike" feat.

It means that thousands of jobs remain in doubt as the billionaire tycoon seeks to persuade landlords to slash store rents so that he can keep them open.

Sports Direct has already said it is to shut four stores at shopping centres in Essex, Gateshead, Norwich and Nottingham after failed talks with their owner, property group Intu.

Meanwhile suppliers, pensioners and customers have been left out of pocket as the administration process meant the business was picked up free of liabilities for its new owners.

Earlier this month, Mr Ashley told Sky News that House of Fraser could be merged or "should at least work very closely together" with rival Debenhams, a company in which Sports Direct owns a 30% stake.

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But there was no mention of that suggestion in the latest statement.

More follows…

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Brexit blamed as housing market hits six-year low

By John-Paul Ford Rojas, business reporter

Brexit uncertainty has pushed a key measure of the housing market to a six-year low, according to surveyors.

The Royal Institution of Chartered Surveyors (RICS) said its house price balance – a gauge of whether values are more commonly rising or falling – slipped to -11 in November, down from -10 in October.

It was the lowest level since September 2012 and worse than expected by economists.

RICS chief economist Simon Rubinsohn said: "It is evident… that the ongoing uncertainties surrounding how the Brexit process plays out is taking its toll on the housing market.

"Indeed, I can't recall a previous survey when a single issue has been highlighted by quite so many contributors."

Residential properties in London
Image: Caution is visible among house buyers and vendors, the survey suggests

Price falls were most acute in London and the South East of England – where there are more higher-priced homes, exposed to higher stamp duty, and there is also anxiety about the impact of Brexit on the capital's financial services sector.

The survey also pointed to falls in the number of people looking for a new home, new properties being listed for sale and agreed sales.

There was also a big downturn in expectations for sales in the coming three months, with this measure falling at its sharpest since the Brexit referendum in June 2016.

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Mr Rubinsohn said: "Caution is visible among both buyers and vendors and where deals are being done, they are taking longer to get over the line.

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"Significantly the forward-looking indicators reflect the suspicion that the political machinations are unlikely to be resolved any time soon.

"The bigger risk is that this now spills over into development plans making it even harder to secure uplift in the building pipeline to address the housing crisis."

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‘You can’t tariff your way out out of a trade deficit’: Here’s why China’s exports to the US have held up in the face of Trump’s trade war

  • Growth of Chinese imports targeted by tariffs has fallen sharply in recent months.
  • But the US-China trade deficit has held at a record high.
  • Trade balances are influenced by a combination of factors, including foreign exchange rates, the strength of an economy, and how much a country borrows from abroad.

Washington and Beijing have placed tariffs on hundreds of billions of dollars worth of each other's products, leading certain imports to an expected slowdown on each side. But even as China loses share in markets targeted by tariffs, its trade surplus with the US has remained at record highs.

US import growth of Chinese products included in the first round of tariffs dropped from 8.6% to -22.1% year-over-year in October, for example, according to UBS economist Li Zeng. While growth has held up relatively better for imports targeted in later tranches, it has still declined.

Likewise, American businesses have warned they could lose market share in China's market. Farmers, for example, have lost out to other countries in the face of retaliatory duties on agriculture products.

But the US has imported other products from China at an accelerated pace in recent months. The goods trade deficit with Beijing hit an all-time high of $43.1 billion in November, with Chinese shipments to the US up by nearly a tenth from a year earlier.

"The Trump administration is learning you can't tariff your way out of a trade deficit," said Adam Ozimek, an economist at Moody's. "So, if you decrease some imports with tariffs it will be made up by greater imports in other goods and services or fewer exports. There are no surprises here."

Trade balances are determined by an assortment of factors, including foreign exchange rates, the strength of an economy, and how much a country borrows from abroad. There are countries with low tariff rates and significant trade surpluses, Ozimek noted.

The decline in imports subject to tariffs could also be due to a slowdown in frontloading, or companies rushing orders to avoid duties. There had been an added level of uncertainty when the first round of tariffs was levied because Americans weren't sure if Trump would follow through, said Mary Lovely, a professor at Syracuse University and expert on trade at the Peterson Institute for International Economics.

"Americans were on notice for later rounds of tariffs, though, and they did increase imports ahead of the tariff," she said. "This anticipation effect can be seen in the UBS charts. Recent declines in imports may reflect a letdown after this anticipatory stock up."

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The stock market’s death cross is particularly bad news this time around, Bank of America says

  • The dreaded technical death cross has formed in the S&P 500.
  • A death cross occurs when the 200-day moving average falls below the 50-day moving average.
  • The S&P 500 experienced a death cross earlier this month, and a new report from Bank of America's technical analysts explains why this time could be especially painful for investors.
  • "The effects of an S&P 500 Death Cross became amplified when the 5-period slope of the 200 day [moving average] was negative," the analysts wrote.

The stock market's recent drop has come fast and furious, with the S&P 500 plunging nearly 5% in the last week and seeing its losses total 8% in three months. The benchmark index even briefly slipped into a correction — defined by a loss of at least 10% from its recent peak. And while trade tensions appear to be thawing, giving investors some hope, there's a technical indicator that poses a threat to bullish momentum.

The death cross.

A death cross forming in the S&P 500 is never a welcome development for investors. After all, the long-term technical indicator denotes short-term momentum is slowing, and is widely viewed as a bearish signal.

And this time around, the death cross could prove even more damaging, according to a new report from Bank of America's technical analysts.

The current death cross — when a security's short-term moving average falls beneath its 200-day moving average, or in popular cases the 50-day falling beneath its 200-day — which formed on December 7, features a declining 200-day moving average. That bodes particularly poorly for the market, if history is any indication.

"The effects of an S&P 500 Death Cross became amplified when the 5-period slope of the 200 day [moving average] was negative," technical research analysts Stephen Suttmeier and Jordan Young wrote in a note to clients out Tuesday.

"This scenario, which is the present case, saw average and median returns drop by 2.72% and 4.31%, respectively for 20-day returns. Performance for all periods going out to the 195-day return window became impaired."

The S&P 500's performance drastically weakens when the index enters into a death cross with a falling 200-day moving average.

Zooming out and examining more historical context for death crosses featuring falling 200-day moving averages paints an even grimmer picture.

The percentage of time the market rose following S&P 500 death crosses while the 200-day was in decline dropped to 25% from 59.43% for the 20-day return period, according to the report.

Furthermore, "the standard deviation of returns dropped across all return periods, implying more consistent inhibited returns after a Death Cross with a declining 200-day MA."

The analysts noted the current death cross is just the 47th-ever such formation in the S&P 500 since 1928.

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Shopify wants to become the ‘back office’ for direct-to-consumer brands’ ad budgets and marketing

  • Shopify has quietly become a major e-commerce player powering DTC brands' websites.
  • The company aims to be a one-stop shop for merchants, handling fulfillment, analytics, and web design.
  • While Shopify is best known for e-commerce, it's increasingly moving into marketing and paid advertising to compete with Amazon.
  • Brands like how Shopify can create customized websites, but Amazon can handle all parts of e-commerce for brands, including shipping and warehousing.

Outdoor Voices, Allbirds and Kylie Cosmetics have more in common than being direct-to-consumer startups.

All three use Shopify to power the back-end of their e-commerce websites and are a few of the platform's 60,000 merchants. From toothpaste to bed sheets, the number of direct-to-consumer brands pitching wares has exploded, and instead of selling products in retailers or through Amazon, DTC companies are increasingly selling through social media platforms or their own websites. At the same time, Amazon is cozying up to small and mid-size brands with its "Amazon Storefronts" site that sells items from 20,000 merchants.

As the DTC boom continues, Shopify has quietly become a tech giant through its self-serve platform that powers e-commerce, handles fulfillment and analytics, and, increasingly, ad buying. Shopify reported $270 million in revenue in the third quarter (a 58% year-over-year spike) and expects to bring in roughly $1.05 billion this year. The company's growth and work with DTC brands landed Shopify on Business Insider's annual list of most interesting ad-tech and mar-tech firms of 2018.

While 12-year-old Shopify is most known for handling e-commerce, the firm is building out its marketing platform with tools that let merchants do things like run paid media campaigns on Facebook and Google and text a virtual assistant called Kit to manage their campaigns. There is also a messaging app named Ping that logs customer queries for merchants to respond to.

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Shopify offers an alternative to Amazon for merchants who don't want to rely entirely on the e-commerce behemoth for their business. But there are catches to both.

One major challenge with Shopify is that it can be harder for merchants to drive traffic to their own websites than it is to Amazon, said Matt Rednor, who runs the ad agency Decoded Advertising. Merchants also have to figure out warehousing and shipping on their own with Shopify.

"You need to generate your own traffic to your [Shopify] website," he said. "If you're not a savvy marketer that knows how to drive traffic, then it's hard for you to prove success there. Amazon has a built-in audience and billions of online buyers already."

But retailers that go all-in on Amazon risk becoming "dependent on Amazon not screwing you," Rednor said. For example, Amazon can control prices and brands' ranks in search results.

Shopify wants to handle digital ads for retailers

Shopify's director of product and marketing technology Michael Perry said Shopify aspires to be a one-stop shop for merchants, particularly direct-to-consumer brands that use the company's software to sell through their Instagram, Snapchat and Facebook accounts.

"We've become the true back office for all these businesses that are now having this direct-to-consumer experience," Perry told Business Insider.

In addition to powering e-commerce sites and doling out reporting and analytic tools, Shopify is inching into paid media. In October, the company launched a marketing section to its platform that allows for merchants to create, run and track Facebook and Google ads.

Unlike traditional brands that focus on branding and creative, direct-to-consumer marketers are notorious for zeroing in on performance marketing and often don't have huge advertising budgets to spend with agencies.

Shopify is looking to capitalize on brands moving advertising in-house and is arming its merchants with media-buying tools. Merchants can set a daily ad budget and Shopify's tools — including the virtual assistant Kit that Perry founded — then manage ad campaigns and can set bidding and targeting parameters automatically.

Michael Perry Shopify Kit

Shopify also recommends specific products for merchants to promote in ads based on how they're selling.

"It once took teams of people at agencies and huge pools of people to leverage all these places where their audience existed," Perry said. "Now, we've done so much with helping them maintain and scale their authenticity through really smart technology choices to help them create those bridges of direct-to-consumer relationships that they historically have not been able to establish on their own."

Shopify also has an app store — much like Apple's App Store — in its marketing dashboard that offers services that merchants can pay for to handle more complex, ongoing ad campaigns. For $49 a month, they can use an app called Looga to manage their Facebook advertising. Most recently, Shopify added support for Google Ads to its platform and also plugs into Google's Smart Shopping campaigns that use machine learning to change bidding, creative and targeting on the fly for small businesses and retailers.

Shopify doesn't completely replace media buyers, though

Decoded Advertising's Rednor said that while Shopify's move into advertising does cut into the work that media buyers do, it does not necessarily replace the strategy, creative and branding expertise they can offer.

"There's still a reason that you need the best of the best, and so I'm not concerned," he said.

Rednor has been experimenting with Shopify and Amazon to sell its 42 Birds yoga brand — a brand the agency built itself to better understand what makes direct-to-consumer marketing work. Right now, 42 Birds' e-commerce efforts are split between Amazon and Shopify.

"It's more expensive to have everything on Amazon, but they handle your warehousing and shipping for you," he said. "We're trying to test the waters and hopefully start shifting away from Amazon and more towards Shopify if we can — it allows us to create our own brand and we don't have to pay as high of a commission and other charges as you do with Amazon."

Digital brands are setting up IRL stores

As direct-to-consumer brands move into physical retail, Shopify isn't far behind. Furniture brand Burrow, for example, is testing a brick-and-mortar store a few blocks away from Glossier's recently opened flagship store. Brooklinen and Thinx have also set up holiday pop-ups in New York's SoHo neighborhood.

The Boy Brow Room

A post shared by Glossier (@glossier) on Dec 7, 2018 at 2:00pm PST on

Shopify is the technology behind many of these brands' websites and has developed point-of-sale technology similar to Square as they move into physical retail.

Physical retail still makes up 90% of sales and point-of-sale technology is an area where Shopify sees an opportunity to further blend the personalization of e-commerce shopping with real-world stores.

"The landscape of physical retail has matured — people don't like walking in big, random malls or department stores," Perry said. "They want to have that Instagram-like experience in the real world, and they will see a lot more of that in 2019."

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