Good morning! You don’t really associate Japan with outdated tech. If anything, it’s the opposite. Reality though is slightly different; industries such as alcohol, mining, etc. are mandated to store business applications in physical media formats like floppy disks. Naturally, businesses kept using floppy disks. That’s changing now, as per Ars Technica; Japan’s minister for Digital Transformation, Taro Kono, has declared a "war on floppy discs" and is urging businesses to adopt newer tech like the cloud. What is unclear to us though is: who even makes floppies anymore? 

Soumya Gupta and Adarsh Singh also contributed to today’s edition.

The Market Signal 

Stocks & Economy: The question of ‘whether’ the US Fed Reserve will cut rates has been conclusively set to rest and the only debate now remains on ‘when’. Fed chair Jerome Powell dealt a blow to March-rate cut bets by saying he wanted to ensure that the job of taming inflation is fully done before pivoting. Stocks fell after Powell’s presentation. 

Asia followed US markets’ cue, with only South Korean shares showing upward momentum. 

Indian equities rose on Wednesday in anticipation of favourable tweaks in the interim Budget. The GIFT Nifty indicates a positive opening today as well. Goods and services tax collections clocked ₹1.72 lakh crore (~$20 billion) in January, up 10.4% from the previous year. But growth in eight sectors called the industry core, retreated to 3.8% in December from 7.9% in November. That was the slowest growth in 14 months.

ENTERTAINMENT

A (Musical) Staring Contest

The world’s largest music label, representing legends like Taylor Swift and Eminem, is in a who-blinks-first match with the world’s most disruptive social media firm over music licensing. Universal is disinclined to renew its agreement with TikTok, saying TikTok is paying too little. TikTok says Universal is walking away from the platform that makes new music and stars go viral overnight.

It’s reminiscent of Fortnite maker Epic Games’ lawsuits against Apple (2021) and Google (2023) over allegations of anti-competitive practices. Between Universal and TikTok, who’ll cave first? 

Sports overdose: Netflix’s $5 billion WWE deal signals its shift from just ‘sports-adjacent’ content. But are live sports and sports documentaries worth it? Puck argues streaming platforms’ best bet is to promote a new sport in the saturated US market or take a big one (like the NFL) to international markets. Big Tech may be better positioned to go international than legacy media.

🎧 TikTok’s beef with the world’s biggest music label. Also in today’s edition: there's a new job category in the market—robot wranglers. Tune in to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts. 

WORK

Tug Of War

Workers in the US are not happy. A Glassdoor survey reveals that only 45.6% of respondents feel positively about the future prospects of their employers. This is the lowest figure since the survey began in 2016.

Reasons galore: Mass layoffs and an impending wave of automation seem to be the driving forces behind these numbers. A fast pivot to AI reflects this well. There's also the question of productivity. Employers and employees don’t really see eye-to-eye on it because there’s no singular definition of it. As of now, in-office visibility seems to be the sole criteria, with companies cutting off remote employees first.

Employee pushback: Flexibility at work is the only domain where employees seem to be winning. Eight-two percent of Fortune 500 employers offer some remote work option. Employees are resorting to “coffee-badging” as well.

Consequently: Office real estate in the US is set to lose $1 trillion.

UNION BUDGET

Interim But No Trifling Matter

Finance minister Nirmala Sitharaman will be presenting only an interim budget (vote on account) on February 1, yet she will need to have some familiarity with the juggler’s art to pull off the balance between word and deed in an election year. 

The big K: A Reuters survey has revealed distress in rural areas; jobs are scarce, farm incomes are plummeting, and indebtedness is rising. 

Consumption in urban areas, however, is thriving. Riding on an SUV boom, India is estimated to have sold a record 4.1 million passenger vehicles in 2023. Premium homes are getting bigger but affordable housing is in short supply, which the government is reportedly addressing. Manufacturing is slowing down but the stock market is at an all-time peak.

Funding trouble: The banking industry is going through a structural adjustment where it is losing the sources of low-cost funds—savings and current account deposits—and high-yielding assets—consumer loans. The squeeze is showing up in valuations. 

The Signal

The government has previously indicated that it does not want any fiscal slippage. But the stress in the banking sector will likely be a worry when the finance minister draws up the government’s borrowing programme. Minister Sitharaman has tried to temper expectations but may still need to indicate a bump in capital expenditure as private sector capex is still lagging behind. Sitharaman will also find it hard to crimp welfare spending. PM Narendra Modi told Parliament that the Budget will be directional, with a focus on women empowerment.

BANKING

“You Don’t Get A Big Ship By Bundling Ten Dinghies”

The quote of the day award goes to Shen Meng, director of investment bank Chanson & Co. The context being Beijing undertaking its largest consolidation in banking yet.

China is suffering a rural lender crisis. The bad loan ratio (BLR) of the 2,100 banks operating in this space is 3.48%, over twice that of the country’s banking sector. As of June 2023, 96% of China’s 337 high-risk lenders were co-operative and rural commercial banks.

The rot peaked in 2022, when depositors in the agricultural province of Henan protested against four local banks for freezing their funds. China’s rural lenders are plagued by poor governance, operational opacity, exposure to a tanking housing market, and weak assets and liabilities—which were compounded by Beijing’s zero-Covid policy at the time.

China’s previous consolidations of rural banks have been questioned. For instance, lender Liaoshen Bank still had a BLR of ~4.7% by 2022-end.

EARNINGS

Wall Street Asks For The Moon

Investors seemed unimpressed with Microsoft’s, Alphabet’s, and AMD's quarterly results that ended December 2023 despite the trio faring rather well. Alongside Nvidia, they collectively lost $190 billion in value because investors keep wanting more.

Microsoft posted its highest growth in profit and revenue in several quarters thanks to gaming (61% increase in revenue from the previous quarter) and Azure cloud sales (30% increase). Caveats: it’s the first time Microsoft reported revenues from Activision Blizzard—whose acquisition it completed late last year—and six percentage points of Azure growth were due to AI, underscoring cloud dependence on emerging tech.

Alphabet reported an 11% increase in ad revenue from the last quarter, with YouTube recording a 20% increase. Google Cloud revenue was up 26% year-on-year, yet the results didn’t meet expectations.

Otoh, Samsung Electronics suffered a ~35% fall in year-on-year operating profit, but its results were an improvement from the previous quarter.

FYI

Pink slips: Payment giant PayPal will slash 2,500 jobs (~9% of its workforce) over the course of 2024. IT services company Wipro will also trim “hundreds” of mid-level on-site roles in an effort to boost margins, per The Economic Times. Jack Dorsey’s Block is also cutting jobs.

Come, make more: The Indian government has reduced the import duty on some mobile phone parts from 15% to 10%. The duty covers components such as back covers, battery covers, and GSM antennas. 

Double whammy: Pakistan’s former prime minister Imran Khan and his wife Bushra Bibi were sentenced to 14 years in jail for illegally selling state gifts from the Toshakhana (treasure house). This follows the 10-year term Khan received for an alleged breach of state secrets.

It's his turn: Johor’s Sultan Ibrahim was installed into office as Malaysia’s 17th king. Ibrahim succeeds Pahang’s Al-Sultan Abdullah Sultan Ahmad Shah, who completed his five-year term as Malaysia’s rotational monarch.

Batting on: Board of Control for Cricket in India (BCCI) secretary Jay Shah will continue to helm the Asian Cricket Council (ACC) after his extension was unanimously backed by all members of the cricketing bloc. Shah took over the ACC presidency in 2021.

Red signal: The Reserve Bank of India has stopped Paytm Payments Bank from accepting any customer deposits after February 29. The bar also includes credit transactions and top-ups in prepaid instruments and wallets.

Gimme more: The Burman family increased its holdings in Religare by ~4% to 25.1% in the shadow lender through open market purchases, per The Economic Times. The purchase further consolidates their position as the single largest shareholder in Religare.

THE DAILY DIGIT

$2.1 billion

Or ~₹17,500 crore. The amount Google spent on severance and other expenses in 2023, the year it laid off more than 12,000 employees. In January 2024, it spent $700 million on severance charges. (The Verge) 

FWIW

Time loop: Surfing on the internet can often make you feel that you’re stuck in one. Trends seem to have a cyclical lifespan, which can be great sometimes (like an adored fashion trend of the 90s coming back) but not every time. Case in point, legging legs. That’s a trend sweeping across adolescent TikTok these days. The trend falls back on the age-old trope that only thin legs are good and they look great in leggings. Yeah, sounds familiar right? Thankfully though, Gen Z has Millennials to steer them right. They’re fighting back against the trend with videos of body positivity, which honestly gives complete Hum Saath Saath Hai vibes. 

Helping the help: All those claims of robots taking away our jobs just need to gander at the hottest factory job in the USA i.e., robot wranglers. Their jobs are pretty much what their name suggests, they’ve to go around the factory floors and help robots out. That means maintaining them, corralling them and occasionally, even keeping tabs on their locations. In a way, they’re supposed to act as a bridge between the present and the future. That’s only going to increase as more robots are introduced in factories; currently 21% of warehouses in the USA use some form of robotics. Guess our robot colleagues will be more WALL-E than Terminator. 

Recycling: That’s the strategy for the world’s largest jewellery company by volume, Pandora. The Danish company announced this week that it’ll only source 100% recycled silver and gold for its collections. The move will greatly impact its credentials as an environmentally conscious player. Sceptics are concerned about greenwashing. Why? Because precious metals like silver and gold aren’t exactly ‘waste,’ so how are they being recycled? And if Pandora is talking about melting and using pre-existing collections… is that really recycling? This ambiguity is precisely the problem with such claims and Pandora sadly does not have any answers. Maybe they should partner with a tech company to further bolster their claims… 🤔