Powerscourt

By Powerscourt on 10/04/2020

Powerscourt Coronavirus Briefing – 10 April 2020

ANALYSIS

EVEN as the death toll soars and the corporate casualties begin to fall over, the markets appear to think we are at the end of the beginning of the coronavirus pandemic and global government helicopter money will save us. US equities are up almost 25% since the bottom while the FTSE 250, not a bad proxy for the UK domestic economy, rose almost 16% over the last four days, its best week ever.

The rising market tide will not float all boats just yet. The Times reports this morning that partners at Slaughter and May, the Magic Circle law firm, who earned up to £2.9m each last year, were told Friday that all payments to them were suspended because of the shock to the business caused by the crisis. Slaughter and No Pay?

Asian markets today were less exuberant  The CSI in China fell 0.2%, the Topix in Japan fell 0.8%, while in South Korea the Kospi fell 0.4% – Hong Kong and Singapore closed for Good Friday.

Markets in the US had risen Friday after the Federal Reserve announced new economic support measures including $2.3tn of new loans for small businesses. The S&P 500 rose 1.4% on the day and 12% across the short week.

Oil prices fell again as a deal to reduce production agreed by Saudi Arabia and Russia was rejected by Mexico. Scott Shelton, an energy specialist at ICAP, was widely quoted: “The collapse in oil prices is a result of the reality that while OPEC is cutting as expected, there is simply too much crude [oil] in the physical space for sale, with too few pipelines to move it and too few buyers to take it.”

UK Prime Minister Boris Johnson is now out of intensive care and back on a hospital ward, but with no indication of how long recovery might take. His father has told BBC Radio 4 on Friday morning: “I don’t think you can say he is out of the woods now. He has to take time”.

Foreign Secretary Dominic Raab gave the government press briefing yesterday, emphasising the importance of maintaining the lockdown and good social distancing over the Easter weekend in order not to undo the gains made so far. He has said that lockdown restrictions will stay in place until evidence shows the UK is beyond the peak of the virus.

The London Stock Exchange is closed for Good Friday, but in economic news the head of the International Monetary Fund Kristina Georgieva warned yesterday that economic forecasts due next week will be bleak. The IMF predicts that almost all of the organisation’s 189 member states will see a reversal of living standards in 2020 and that the economic fallout of the pandemic will be the worst since the Great Depression.

We will continue to publish this wrap over the Easter weekend, albeit there will be much less news

 

 

WHAT ARE COMPANIES SAYING?

 

Consumer and Retail

Amazon

Amazon is building its own Covid-19 testing capabilities so it can monitor the health of its employees, as it contends with ongoing criticism surrounding its handling of the coronavirus pandemic. More than 50 Amazon-owned facilities have confirmed cases in the US, many with multiple instances of the virus, according to data compiled by the Financial Times. The company on Thursday said it had begun assembling the equipment to build its first lab, and hoped to start testing on small numbers of its frontline workers, with a view to scaling it across the company.

Disney

Disney’s new streaming service has almost doubled its global subscriber numbers to 50 million since the coronavirus outbreak took hold in February, as lockdown conditions prove a boon for streaming services. Disney+, which launched in the UK and most major western European markets last month, with hits including the Star Wars spinoff The Mandalorian, has signed up 50 million subscribers just five months after launch. It took its rival Netflix, which has more than 160 million subscribers, seven years to reach the same milestone after moving from DVD rental by post to streaming in 2007.

 

Travel & Leisure 

Airbnb

Airbnb has blocked UK properties from accepting new bookings for the coming days unless they are for key workers. It comes after the accommodation website was criticised for advertising properties as suitable for guests to use to self-isolate during the coronavirus pandemic. The firm said it had stopped properties from receiving new bookings until at least 18 April. An exception will be made for its initiative that offers free stays for NHS staff and paid or subsidised stays for other key workers exempt from the government’s travel restrictions.

 

Industrials

EasyJet

Easyjet has deferred delivery of nearly a quarter of the 107 new planes it has on order with Airbus and said it could retire another 16 aircraft it leases, out of a total fleet of 330. In its next financial year Easyjet will take no new deliveries of aircraft for the first time in its 25-year history. The decision to defer the delivery of 24 new planes over the next three years follows the decision to ground its entire fleet because of the pandemic.

Tesla

Tesla Inc stated it has started China sales of two more Model 3 variants built at its Shanghai plant, meaning all Model 3 sedans sold in the country are now locally made and not subject to import tax. The development comes at the tail end of a Sino-U.S. trade war characterised by tit-for-tat tariffs on goods and services as varied as metals and cars, which bumped up prices of U.S. made goods in China. It also comes after Tesla suspended production at its San Francisco Bay Area plant due to the broader impact of the coronavirus, with plans to resume normal operation on May 4.

Boeing

Boeing is considering a plan to reduce its workforce by about 10%, according to the Wall Street Journal, as the aerospace giant grapples with the fallout from the coronavirus pandemic. The plan could involve buyouts, early retirements and involuntary layoffs. The potential labor cuts at the aerospace giant, which globally employs about 160,000 people, were expected to largely target Boeing’s commercial arm, these people said. The unit is under tremendous strain due to turmoil in the global airline industry.

 

Financials & Real Estate 

Slaughter & May

Partners at Slaughter and May are losing almost all their pay as the elite City law firm battles to ensure that it survives the Covid-19 crisis.

Steve Cooke, the firm’s senior partner, is understood to have told colleagues in an email that all “discretionary distributions to partners” were suspended and that those funds were “being retained in the business”. Mr Cooke’s email went on to clarify that in “normal times” those distributions would have constituted “nearly all the payments made to partners”.

 Santander

Santander’s UK boss Nathan Bostock has joined the chief executives of Britain’s other major banks in donating a chunk of his salary to charity as the economy is ravaged by the lockdown. Mr Bostock is the last head of a so-called big five lender to take action on his pay, following announcements earlier this week by HSBC, Lloyds, Barclays and Natwest owner Royal Bank of Scotland. Mr Bostock will donate £1m of his total pay packet to a virus fund launched by the bank’s Spanish parent firm. Last year he earned £4.3m.

 

IN THE NEWS

Boris Johnson moves out of intensive care Financial Times

Opec and Russia reach deal to cut oil production by 10m barrels a day – Financial Times

Coronavirus pandemic: EU agrees €500bn rescue package – BBC News

Coronavirus: Worst economic crisis since 1930s depression, IMF says – BBC News

Demand grows for exit strategy with 90% still coronavirus-free – The Times

Dominic Raab unable to tell public when UK’s coronavirus lockdown could be lifted – Daily Telegraph

Cabinet minister Robert Jenrick drives 150 miles to second home during coronavirus lockdown – Daily Telegraph

 




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