Munro Global Growth Fund

What’s the fund?

This month we decided to review the Munro Global Growth Fund, which was established in August 2016 by Nick Griffin. Nick was formerly of K2 Asset Management where he had been running a similar strategy and delivered an average return of 16.5% for the international share portfolio he managed.

Munro is a global equity long-short fund that is focused on identifying secular trends occurring across the global and investing into a portfolio of 30-50 exposed companies. The fund targets double digit returns in all markets, which it believes is possible by investing into those sectors growing faster than the economy in general. Most importantly, Munro has a focus on capital protection which it delivers through its shorting and stop loss policies.

Many clients of Wattle Partners were early investors in this fund, receiving a substantial management fee discount at the time (from 1.35% to 1.00%), and it has since grown to around $1bn as Nick’s skill and competitive advantage becomes obvious.

Where does it fit in your portfolio?

The Munro fund sits within the Thematic Bucket of portfolios due to its sole focus on identifying companies that are capable of growing earnings in an increasingly uncertain global economy. Munro aim to achieve this by applying a thematic or secular approach to analyzing investments whereby they break down their entire universe of global companies into ‘Areas of Interest’ or sub-sectors which offer the greatest leverage to their identified themes. These themes change regularly but have recently been focused around the following:

  • The Digital Enterprise (e.g. Microsoft);
  • E-Commerce (Amazon);
  • Emerging Consumer;
  • Internet Disruption (Google) ;
  • Digital Payments (Pay Pal);
  • Innovative Health (Danaher);
  • Connectivity (Keysight Technologies);
  • Food Revolution (IFF);
  • Infrastructure (United Rentals); and
  • Security (Cisco).

The entire premise of the Thematic Bucket is to expose your portfolio to the themes and sectors that will generate the greatest risk-adjusted returns in the decades rather than months ahead. Munro fits the objectives of the bucket due to Nick Griffin’s proven skill in identifying trends occurring around the world, that saw the fund hold Amazon, Netflix and Alphabet sometime before they became common in Australian share portfolios.

The fund’s exposure and Nick’s competitive advantage is generally within the technology sector, as evidenced by the areas of interest, and therefore complements well with the other investments within the Bucket that are more consumer focused. Importantly, the fund can take both long and short positions, meaning investment ideas that do not pass the due diligence process and are identified as being expensive can be short sold to profit investors.

What does it invest in?

The fund is well diversified, with the largest holding typically between 5% and 7% of the portfolio and a minimum of 30 positions at any given time. The technology and disruption focus of the fund means it is tilted towards the US, with the current geographic allocation as follows:

Of particular interest to investors concerned about the prospects of volatility, is the fact that the fund currently has around 40% in cash following the sale of a number of positions in the lead up to the end of financial year. The managers note that the cash holdings isn’t based on a macroeconomic view but a result of a lack of appropriate opportunities. Sector wise, the fund is overweight technology as you would appreciate, with consumer related businesses and financial services the next largest holdings.

As the Australian currency moves towards long-term lows, it’s worth pointing out that the fund is actively hedged and reports the movement in currency separately to its investment performance for full transparency.

What are the major holdings?

The major holdings of the fund are well spread, including many well-known and popular names. We discuss five of the top holdings below.

Alphabet (Formerly Google): The fund has a long-standing position in Alphabet on the basis that online advertising and in particular advertising on mobile platforms is growing at a substantially faster rate than traditional forms of media. Within this market Google and Facebook along with it are attracting a substantially higher proportion of advertising spend. Munro noted that they found the recent sell off on the back of revenue growth of only 17%, compared to 20% in recent years, bemusing and see substantial value if the company is eventually broken up. They believe the 17x forward price earnings multiple does not reflect the value of Waymo, Google Cloud or YouTube.

Alibaba: Alibaba is an incredible business, being the dominant business to business and business to consumer e-commerce provider in China. The company operates the successful T-Mall and Tao Bao sites among many other businesses. Alibaba was established as an online version of the wholesale markets that occur all over China and has successfully evolved numerous times in the face of increasing competition from outside and within China. The company’s investment in Ant Financial which dominates the online payment landscape in China, offers further upside as it continues to expand into investment, insurance, credit and other financial products.

Amazon: The company speaks for itself in creating one of the richest men in the world in Jeff Bezos. What started as an online bookstore has become an e-commerce behemoth spanning every aspect of the vertical business. Amazon continues to expand its core product overseas and is attracting a larger and larger portion of online sales due to its extensive selection, low prices and extremely efficient procurement technology. The company has expanded into many different business lines, including Audible the audiobook subscription service, Whole Food Markets, where it is seeking to disrupt the traditional grocery store through automation and most importantly, Amazon Web Services which offers cloud support for businesses.

Beyond Meat: Whilst not a large holding, the investment in Beyond Meat was worth mentioning given the success of this company on listing. The company which retails plant based burgers and meat substitutes is exposed to the fast growing vegetarian and vegan food markets and after listing at just $25 is now valued at $140 per share.

Other large holdings include Microsoft, Adobe, United Rentals and ITV.

How has it performed?

The fund performed extremely well in its first 18 months of operation, delivering returns exceeding the benchmark by in excess of 4-5% consistently. In recent months performance has lagged the benchmark, but remains slightly ahead. This has been due to the large increase in the funds cash holdings, to 40%, as they were stopped out of a number of positions and are awaiting opportunities to deploy this capital. Given Munro’s track record of delivering outperformance, we are not concerned about the short-term weakness particularly given it is due to a more conservative allocation to inflated markets.

What income does it provide?

As with all managed funds, the Munro Global Growth Fund must distribute all income and realised capital gains each year. Therefore, distributions are dependent on both the performance of the underlying investments and whether any investments are actually sold. Munro has two traits we value in investment managers, being reasonably low turnover and low active share, indicating it is not replicating the underlying index. This may mean that distributions are not particularly large each year. For instance, the distributions for the 2018 financial year were 3.84 cents per unit and 3.48 cents per unit in 2017.

Charging ahead: How Australia is innovating battery technology

By Jonathon Knott, The Conversation –

As highlighted previously, we believe the transition to a cleaner energy future will be an important theme for investors to capture in the decades to come; it is however, not without risk. Below we have included a reprinted article from ‘The Conversation’ discussing Australia’s innovation drive in the sector.

Lithium-ion remains the most widespread battery technology in use today, thanks to the fact that products that use it are both portable and rechargeable. It powers everything from your smartphone to the “world’s biggest battery” in South Australia.

Demand for batteries is expected to accelerate in coming decades with the increase in deployment of electric vehicles and the need to store energy generated from renewable sources, such as solar photovoltaic panels. But rising concerns about mining practices and shortages in raw materials for lithium-ion batteries – as well as safety issues – have led to a search for alternative technologies.

Many of these technologies aren’t being developed to replace lithium-ion batteries in portable devices, rather they’re looking to take the pressure off by providing alternatives for large-scale, stationary energy storage. Australian companies and universities are leading the way in developing innovative solutions, but the path to commercial success has its challenges.

Australian alternatives

Flow batteries

In flow batteries the cathode and anode are liquids, rather than solid as in other batteries. The advantage of this is that the stored energy is directly related to the amount of liquid. That means if more energy is needed, bigger tanks can be easily fitted to the system. Also, flow batteries can be completely discharged without damage – a major advantage over other technologies.

ASX-listed battery technology company Redflow has been developing zinc-bromine flow batteries for residential and commercial energy storage. Meanwhile, VSUN Energy is developing a vanadium-based flow battery for large-scale energy storage systems. Flow batteries have been receiving considerable attention and investment due to their inherent technical and safety advantages. A recent survey of 500 energy professionals saw 46% of respondents predict flow battery technology will soon become the dominant utility-scale battery energy storage method.

Ultra batteries

Lead-acid batteries were invented in 1859 and have been the backbone of energy storage applications ever since. One major disadvantage of traditional lead-acid batteries is the faster they are discharged, the less energy they can supply. Additionally, the lifetime of lead-acid batteries significantly decreases the lower they are discharged.

Energy storage company Ecoult has been formed around CSIRO-developed Ultrabattery technology – the combination of a lead-acid battery and a carbon ultracapacitor. One key advantage of this technology is that it is highly sustainable – essentially all components in the battery are recyclable.

Ultrabatteries also address the issue of rate-dependent energy capacity, taking advantage of the ultracapacitor characteristics to allow high discharge (and charge) rates. These batteries are showing excellent performance in grid-scale applications. Ecoult has also recently received funding to expand to South Asia and beyond.

Repurposed storage solutions

Rechargeable batteries are considered to have reached their “end of life” when they can only be charged to 80% of their initial capacity. This makes sense for portable applications – a Tesla Model S would have a range of 341 km compared to the original 426 km. However, these batteries can still be used where reduced capacity is acceptable.

Startup Relectrify has developed a battery management system that allows end of life electric vehicle batteries to be used in residential energy storage. This provides a solution to mounting concerns about the disposal of lithium-ion batteries, and reports that less than 5% of lithium-ion batteries in Europe are being recycled. Relectrify has recently secured a A$1.5m investment in the company.

Thermal energy storage

Energy can be stored in many forms – including as electrochemicalgravitational, and thermal energy. Thermal energy storage can be a highly efficient process, particularly when the sun is the energy source.

Renewable energy technology company Vast Solar has developed a thermal energy storage solution based on concentrated solar power (CSP). This technology gained attention in Australia with the announcement of the world’s largest CSP facility to be built in Port Augusta. CSP combines both energy generation and storage technologies to provide a complete and efficient solution.

1414 degrees is developing a technology for large-scale applications that stores energy as heat in molten silicon. This technology has the potential to demonstrate very high energy densities and efficiencies in applications where both heat and electricity are required. For example, in manufacturing facilities and shopping centres.

Challenges facing alternatives

While this paints a picture of a vibrant landscape of exciting new technologies, the path to commercialisation is challenging.

Not only does the product have to be designed and developed, but so does the manufacturing process, production facility and entire supply chain – which can cause issues bringing a product to market. Lithium-ion batteries have a 25 year headstart in these areas. Combine that with the consumer familiarity with lithium-ion, and it’s difficult for alternative technologies to gain traction.

One way of mitigating these issues is to piggyback on established manufacturing and supply chain processes. That’s what we’re doing with the S4 Project: leveraging the manufacturing processes and production techniques developed for lithium-ion batteries to produce sodium-ion batteries. Similarly, Ecoult is drawing upon decades of lead-acid battery manufacturing expertise to produce its Ultrabattery product.

Some challenges, however, are intrinsic to the particular technology.

For example, Relectrify does not have control over the quality or history of the cells it uses for their energy storage – making it difficult to produce a consistent product. Likewise, 1414 degrees have engineering challenges working with very high temperatures.

Forecasts by academicsgovernment officialsinvestors and tech billionaires all point to an explosion in the future demand for energy storage. While lithium-ion batteries will continue to play a large part, it is likely these innovative Australian technologies will become critical in ensuring energy demands are met.

Government Co-Contribution

Money for nothing…..

There is a little-known way that all Australians, young and old, can get $500 for nothing. It’s called the Government Co-Contribution and was established to incentive people to make additional contributions into their superannuation accounts.

Well it’s not quite money for nothing, but it’s quite close. In return for contributing $1,000 in after-tax funds into your superannuation account, you may be eligible to receive as much as $500 in the form of a co-contribution straight from the Government. If you receive any money and the amount you will receive is determined by some straightforward eligibility criteria:

  1. You must lodge a tax return for the given financial year;
  2. You must be less than 71 years old at the end of the financial year;
  3. You must not hold a temporary visa;
  4. You must have a total superannuation balance between $1.6m;
  5. You must not have exceeded your non-concessional contribution cap for the financial year;
  6. Finally, you must pass two different income tests.

The first income test is the ‘income threshold’ which requires you to have a total income including reportable fringe benefits of less than $52,697 for the 2018-19 financial year. If your income is equal to or less than $37,697, the lower threshold, you will receive the maximum co-contribution of $500. If your total income is between the two amounts your co-contribution will be reduced by 3.333 cents for every dollar.

The final test is the ‘eligible income’ test which required you to be engaged in some form of employment in order to be eligible for the payment. Specifically, at least 10% of your income must come from employment related activities.

So, there is an easy way to receive a guaranteed 50% return.

Costa Group Holdings (CGC)

We may be wired differently to the rest, but when we see companies fall by 20% or more in a day out interest is automatically piqued. Whether it is the need to search for a discount, or something contrarian in our blood, we tend to see value in these ‘fallen angels’. And with interest rates at an all-time low, markets and most importantly individual companies trading at stretched valuations, there seem to be more and more of these every month.

This week a client reached out and put some very simple words forward, being that the basis of education relating to economics and financial markets is still reliant on the ‘rational man’ concept. That being markets will react rationally and price in all relevant information at all times. Yet anyone who has been involved in investing at any time over the last 100 years knows this is simply not the case, investing is an inherently emotional pursuit and these emotions regularly result in mis-pricings.

This month we were surprised at the reaction to Costa Group’s earnings downgrade and weaker outlook for its many markets, with the share price falling 25% and reaching multi year lows.

Who is Costa Group?

Costa is Australia’s leader grower, packer and marketer of fresh fruit and vegetables with five core business lines: berries, mushrooms, tomatoes, avocados and citrus fruit. In fact, it is the number one producer of blueberries, raspberries, mushrooms, glass house tomatoes and citrus in Australia. That is some sort of monopoly.

Costa was traditionally reliant on the production of berries and citrus but post it’s listing in 2015 the company has invested substantially to diversify its earnings base, as has been seen in the revenue chart below:

The Costa business model is based around having a 52 week production cycle and diversifying its earnings base sufficiently to ensure a poor season for one type of fruit does not impact the business as a whole. This has been extended to overseas investments including Morocco and China, the produce from which is delivered directly into Europe and China respectively. This is going someway to remove the reliance on the major supermarkets who purchase 75% of Costa’s production.

So, what happened?

Anyone who shops at Woolworths or enjoys some blueberries on their morning muesli would have seen it coming. The price of both blueberries and avocados in 2018 dropped substantially selling for as little as a few dollars a punnet, and that was only the start of the problems for Costa.

The company was hit by a quadruple shock, with poor weather in Morocco resulting in its production being sold into Europe at the peak of supply, meaning lower prices were received. Next, the Australian mushrooms experienced an unseasonably warm growing season and the expanded growing centre was still waiting for commissioning which impacted production. Then raspberries were impacted by poor quality and fruit flies were detected in their citrus plantations. It couldn’t get much worse.

Yet it was still a shock when the company reiterated its previous guidance at the end of May and investors capitulated. The company confirmed that revenue was down 2.4% and EBITDA would fall 42% to $35.3m for the financial year. They indicated that the results for the full calendar year of 2019 would be in line with the previous year but below previous expectations due to the combination of events listed above. However, they clearly indicated that avocados, tomatoes and blueberries had not been impacted, which represent a majority of their revenue base.

Our view

We think Costa is a case in point as to why agricultural and food production companies have had such a difficult time on the ASX and in other listed markets. Costa is an example of a high-quality company, with great long-term assets and production schedule, but which became overvalued due to the exuberance of short-term investors. The company operates in a weather dependent industry, therefore, poor seasons will occur regularly and the companies annual profits will be volatile. This appears to have been misunderstood by the market.

As a smaller company, valued at $1.3bn we think Costa has some merit. The company is nearing the end of a significant capital expenditure cycle, having upgraded and planted out more of its core blueberry, mushroom and tomato plantations, costing some $200m. It continues to derive strong margins of around 14% from these business lines and delivers leverage thanks to its fixed lease agreements for the underlying properties.

We believe the various issues are cyclical and simply part of owning an agricultural company. Management have done a lot of work to diversify the business which will hold them in good stead moving forward. The company currently trades on a forward price earnings ratio of just 16x, which is a discount to most Australian food companies and most importantly much lower than global beers like Calavo Growers (25x) and Scales (18x).

Model Portfolio Update

Looking around the markets, the Model Portfolio’s large and growing exposure to global share markets ensured investors benefited from the significant upside delivered around the world. Whilst the performance of the ASX was strong, it was usurped by the US and Asia.

Within Australia the highlights remained the mining and materials sector as the likes of BHP and Rio Tinto benefitted from well publicised iron ore supply issues even as export volumes stagnated. The Plato Fund has an exposure to both companies whilst both Boral and Orora fall into this group.

The other performers were driven by the aftermath of the Federal Election and subsequent rate cut with those businesses offering defensive income streams and exposed to the right sectors performing strongly. This month they were financials and banking (3.49%), healthcare (4.20%) like Ramsay and CSL, Consumer Staples (3.02%) including Woolworths and Industrials (4.47%) which includes both technology and operational companies like Qube.

Gold bullion: Gold bullion remained one of the best performing asset classes of 2019, reaching all-time highs above $2,000 in Australian dollar terms and delivering a return of 7% for the month. Gold is a much-maligned investments with traditional stock pickers, brokers and the likes of Warren Buffet unable (or unwilling) to properly value the asset due to its lack of cashflows. What we know is that gold acts as an alternative currency in times of volatility and most importantly for Australian’s offers a direct hedge against the biggest risk to our economy; China. In the month gold benefitted from geopolitical escalation in Iran and China, as well as the rate cut delivered by the Reserve Bank of Australia. Major central banks outside the US and Australia continue to buy substantial amounts of gold to hedge against the USD.

Qube Holdings (QUB): Qube continued to deliver during the month, moving to an all-time high as the integration of the Patrick and Asciano businesses continued. The company continues to expand its service offering and has been gaining market share as its competitors decided to increase their prices at an less than opportune time. The strength has been driven by the companies strong Bulk Commodity volumes, as South American iron ore struggled in light of the Vale dam collapse. This offset weakness in car and soft commodity volumes impacted by the drought and flooding in various parts of Australia. Management recently announced the Moorebank Intermodal Terminal will be ready to receive trains from the Port of Botany in the third quarter of this year, with the Target site complete prior to this. The company has been investing heavily into solar energy and the automation of on-site logistics at Moorebank making it one of the more innovative businesses in Australia.

Hybrids and Preference Shares: Whilst we don’t typically focus on the Capital Stable Bucket investments in this report, the performance of the sector was such that it couldn’t be ignored. According to the Solactive Australian Hybrid Securities Index, the sector was up around 2.5% since the start of May and 1.8% in the month of June alone. The preference share sector fell out of favour in the lead up to the Federal Election due to the fact that most pay a fully franked distribution which was likely to be impacted by the Labor Party’s policies. As outlined previously, it is important not to assume that the expected will occur. The result has been the mass selling of preference shares by stockbrokers and short-term investors missing out on the re-pricing of these securities following the election. As mentioned previously, the lack of interest from retail investors has opened the market to the likes of the industry super funds, which are supporting greater liquidity and demand in the sector.

Telstra Corporation (TLS): Telstra continued its upward march during June after announcing higher than expected impairment in May on the back of its substantial business restructure. The company continued to benefit from the ACCC’s decision to block the merger between TPG and Vodafone and the subsequent commencement of an appeal process, which will act to distract both competitors in the short-term. This combined with the banning of Huawei’s technology, used by Telstra’s competitors, from the Australian 5G network is seeing the sentiment towards the company finally turn. A number of brokers upgraded their recommendations during the month, noting that Optus has begun increasing it mobile pricing reducing the gap to Telstra’s more expensive but higher quality service. They also note that the NBN rollout is now 70% complete and believe the market is undervaluing Telstra dominance in technology and investment to deliver the best 5G network.

Boral Ltd (BLD): Boral’s recovery slowed during the month but the company reaffirmed guidance for the financial year and indicated weather conditions were conducive to a strong finish for the year. The company also announced a multi-billion-dollar project with Mirvac that would involve the redevelopment of its Scoresby site in Eastern Victoria. Boral expects this to deliver $66m in earnings through to 2026.

Magellan Infrastructure Fund: The Magellan Fund continued to deliver for investors increasing 4% in the lead up to the end of the financial year. The performance was driven by a further deterioration in bond rates around the world, with some 50% of European bonds now trading on negative yields. This is leaving investors with few opportunities to find low risk income and increasing the attractiveness of Magellan’s key infrastructure assets. Transurban performed strongly as news filtered through of their sweet heart deal with the Victorian Government should the construction of the new western freeway be delayed, whilst Crown Castle, which owns telecommunications towers in the US benefitted from the capitulation of China Tower due to its use of Huawei technology that is banned in many developed countries.

The month that was…

  • Sharemarkets around the world closed the month delivering the highest 6 month returns in several decades. The ASX was up 3.19% for the month taking the 6 month return to 17.22%, whilst the S&P 500 was up 6.89% for June and 17.35% for the 6 months, making it the best half year since 1997. The Australian market was once again driven by the banking and financial sector (+3.49%) with materials and mining (6.28%) and industrials (4.47%) where most of our technology facing companies operate.

 

  • Looking around the world, most of Europe gained at least 5%, lead by the French CAC 40, which was up 6.36% for the month. The Chinese sharemarket began bucking the trade war trend, the Hang Seng was up 5.4% and the CSI 30, 6.1%. June saw a number of highly successful IPO’s and the return to favor of the all-important semi-conductor industry on both sides of the world. In a sign that the rally may continue into the second half unabated, President Trump conceded ground with China at the G20 meeting, relenting on the US ban on sales to Huawei and reopening trade discussions as anticipated.

 

  • Gold bullion reach an all-time high in June, hitting over $2,000 per once in Australian Dollar terms. This oft understood investments works as both an alternative currency and a hedge against volatility. It underperformed in the previous period of expansion as the central banks embarked on unconventional monetary policy. But the threat of falling rates around the world at a time of slower global growth has seen central banks and investors rush back into the commodity. That and the falling AUD have supported the price and made it one of the best performing assets in 2019.

 

  • The US trade re-negotiation continued in June, with India and Mexico brought into focus. The US removed India’s preferential trade status and their exemption from steel and aluminum imports, with India retaliating by imposing tariffs of up to 70% on 28 US products including almonds and apples. The US and Mexico came to an agreement to avoid the commencement of tariffs, with Mexico agreeing to do more in an effort to slow the flow of immigrants moving through its country.

 

  • After some 3,156 days of planning and assessments the Adani coalmine finally received environmental approvals with construction to commence as soon as possible. Interestingly, it came in the same week that AGL Energy announced it’s partnering with Santos to more efficiently extract oil and gas from the ground.

 

  • Evans Dixon was in the news for all the wrong reasons during the month after a claim to the Financial Ombudsman Service was shared with the Australian Financial Review. The complaint was focused around Dixon’s strategy of recommending their own in-house products to their clients, in some cases over 60% of their portfolio, and charging exorbitant fees. The focus was around the US Masters Residential Property Fund, which has reaped fees of over $200m from its investors, in addition to those paid to other Dixon subsidiaries for undertaking renovations on the fund’s properties. The firm which heavily advertises its low up-front cost service in the press, appears to be pushing the same vertical integration story that caused the banks and customers so much pain in the Royal Commission. With a potential class action on the cards we haven’t heard the last of this affair.

 

  • The Australian Dollar reached a 10 year low against the US dollar in June hitting as low as 67 cents in intraday trade. The downward pressure was due to a combination of factors, the first being the RBA’s first rate cut but the 13th in the current period of monetary loosening. This saw the 10-year Government bond rate fall to all-time lows under 1.3%. This suggests all is not well for the Australian economy as exports to China slow and we become more reliant on Government spending.

 

  • The weakness was evidenced by the GDP result for the first quarter, which came in at just 1.8%. this is a decade low and well below the 3.5% long-term average. Most weakness came from the private investment and consumption sector as property valuations, particularly on the fringes of our major cities remain under pressure and many developments are not securing enough presales to proceed. The highlight remains government spending and investment (read infrastructure) which is one of the few positives on the horizon and an area of interest for our clients.

 

  • In the worst kept secret in finance, Facebook announced it would be launching its own cryptocurrency with the support of a long line of financial and technology giants, including Visa, Mastercard, Ebay and Uber. It comes at an interesting time for the company following a number of data and privacy issues, and of course the opinions on the launch are mixed. There has been talk for many years that someone would challenge the world banking order and Facebook seemingly has the network, data and partners to make this a success.

 

  • We were exacerbated to hear the goings on at market darling Afterpay (APT). For those not aware, the company offers a lay-by service for online purchases and has been growing exponentially but is yet to deliver a profit. The company has been forced by ASIC to appoint an external auditor and are being investigated by AUSTRAC for their adherence with anti-money laundering laws. ASIC is concerned that the company is not suitably identifying it’s clients nor is it performing credit checks before lending, requiring as little as a prepaid Visa Card to purchase goods. Interestingly, the founders sold down $104m of shares before the announcement and the companies broker appears to be pressuring shareholders not to sell their own shares. On the final day of the year Visa announced the launch of its own copycat product sending shares down 10%.

 

  • The US and China agreed to resume trade talks ahead of the G20 meeting at the end of the financial year. This comes at an important time after the US began public hearings to discuss further tariffs on up to $300bn in additional exports. It’s estimated that consumer technology products would make up over half the additional amount slowing down the US’ innovation engine. This comes after the Chinese applied tariffs of between 10-25% on any $60bn worth of US exports and the US Government banned its own companies from selling to networking giant Huawei.

 

  • Looking globally, both the Japanese and European economies have shown signs of improvement, with Japanese GDP growing by 2.2% in the March quarter, as the consumer came back to the fore. European unemployment fell to a 10-and-a-half-year low of 7.6% in April as the German economy recovered and Italy moved out of another recession. This came at the same time as Theresa May stepped down as Prime Minister in the UK and more moderate parties gained traction in the EU election.