By Powerscourt on 13/04/2020

Powerscourt Coronavirus Briefing – 13 April 2020

ANALYSIS

Pope Francis asked at Easter Sunday for “a contagion of hope”.

Unfortunately, there wasn’t a lot of hope around on Monday. The unprecedented oil production cuts agreed on Sunday nudged prices slightly higher on Monday while stock indices in Japan, Korea and China all closed slightly lower.

In the real economy, the news is bad. Farmers in the USA are destroying billions of dollars of food because of broken supply chains. Smithfield, the biggest pork producer in the US, closed its largest plant indefinitely because of staff illnesses and warned of meat shortages.

Data from global institutions such as the European Central Bank and IMF is not painting an optimistic picture and there is criticism – real and implied – of governments for their lack of coordination in tackling the crisis.

The latest Brookings-FT tracking index, reported on Monday, suggests the world economy is facing its worst collapse since the Second World War, and the International Monetary Fund’s Managing Director Kristalina Georgieva talked of a “dangerous fracturing” of international cooperation which was likely compounding the situation.

A report from Oliver Wyman and Morgan Stanley on Sunday estimated that global investment banks risk seeing their entire annual earnings wiped out and predicted a deep global recession.

The Vice President of the European Central Bank, Luis de Guindos, said in a number of interviews that he believed if the lockdown lasted a full three months, the Eurozone economy could shrink by 10%.

UK Prime Minister Boris Johnson, as he was being discharged from hospital, paid a heartfelt tribute to the NHS and singled out individual doctors and nurses for his gratitude. His recovery came as the UK death toll topped 10,000 and as Jeremy Farrar, a leading scientific adviser to the government, said the UK was likely to be the worst-hit country in Europe.

WHAT ARE COMPANIES SAYING?

Consumer and Retail

Amazon
Amazon has announced that it will begin to put new grocery delivery customers on a waiting list and curtail shopping hours at Whole Foods stores to prioritize orders from existing customers buying food online. Amazon did say that its online grocery order capacity has increased by more than 60% during the outbreak. Amazon is still running Amazon Fresh and Amazon Prime Now from its own warehouses and also from Whole Foods stores. It is also hiring more workers to expand capacity.

Next
The UK fashion retailer is to reopen its website this week following two weeks of being offline. It closed following staff safety concerns, however hopes to reopen this week following “an unbelievable amount of planning.” The company said that it had consulted with staff before implementing a number of new safety measures including one-way systems and new walkways at its warehouses. It also has the support of Usdaw, the union for retail workers, and the company said that 3000 members of staff have volunteered to go back to work.

Smithfield
The world’s biggest pork processor said on Sunday that it is shutting a U.S. plant indefinitely due to a rash of coronavirus cases among employees. The Sioux Falls plant is individually responsible for approximately 5% of all U.S. pork production. The CEO warned that in addition to impacting supermarkets, “these facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers.”

Travel & Leisure 

Virgin Galactic

Richard Branson’s space tourism company has said that it will continue to run as a critical infrastructure business, despite many of the states it operates in having mandated business closures during the outbreak. A company spokesperson said that that because they were an “aerospace manufacturer with defense and government contracts” they were categorised as critical infrastructure.

Qantas
The Australian airline has said that 750 of its employees have been ordered to self-isolate due to a large coronavirus cluster at Adelaide airport. According to the company, this is the largest ground aviation cluster in the world. They denied failing to comply with government health and safety guidelines saying that there were “no confirmed cases of transmission of the Coronavirus to employees or customers on board our aircraft, or any aircraft globally for that matter. Whilst this transmission is possible, current evidence suggests it’s unlikely,”

Financials & Real Estate 

Allied Irish Banks
AIB announced that it has approved 25,000 payment breaks for its loan customers as it helps homeowners and businesses cope with the impact of the virus. This follows an agreement by Ireland’s five retail banks last month to implement loan repayment breaks of up to three months for those affected. Their CEO told the Sunday Times in an interview that it was inevitable certain customers will require support beyond that time frame.

Hiscox
A group of companies have said they are considering legal action after Hiscox refused to pay out on “business interruption” policies. Hiscox said that the policy was designed to respond to incidents where “you can’t access your property due to a localised event” and that the government’s social distancing measures were “not directly aimed at limiting access to an individual business’s premises”.

Royal Bank of Scotland
The majority of the emergency funds being provided to small businesses has come from RBS, it revealed in a statement. The bank has approved 2,500 loans so far, roughly 70 per cent, of those under the government’s coronavirus business interrupting loan scheme. It credits this partly to being the only major bank currently offering loans worth less than £25,000.

TMT

Huawei
The Chinese telecoms giant said in an open letter from the company’s UK chief that disrupting its involvement in the rollout of 5G in Britain at this crucial time would do Britain “a disservice.” He also highlighted that home data use had increased by at least 50% since the virus first hit the UK which was placing “significant pressure” on the existing telecoms systems. The firm said that it had been working with BT, Vodafone and EE to set up three new warehouses around the country to ensure spare parts stay in supply.

IN THE NEWS

Coronavirus: is investment management the weak link? – Financial Times

Biggest oil production cuts in history – The Times

Coronavirus: Pope calls for global solidarity in Easter message – BBC News