By Powerscourt on 30/06/2020
The UK Prime Minister Boris Johnson will today channel US wartime President Franklin Delano Roosevelt when he announces a £5 billion investment programme designed to stimulate the British economy after coronavirus.
The Prime Minister made an explicit comparison in a speech drawing comparison with FDR’s “New Deal” programme, credited with helping the US economy recovery after the Second World War with a raft of public work-based projects.
But the announcement was overshadowed on Tuesday by gathering evidence that relaxations of the economy, both in the UK and elsewhere, are being paused or stopped due to the virus, throwing the future of the recovery into question.
The Secretary of State for Health, Matt Hancock, announced in Parliament on Monday that the relaxation of pubs and businesses being brought to bear through the rest of the UK from July 4 would not take place in Leicester after around 800 cases were identified in the West Midlands city. Most shops and schools will be closed there until further notice. This is the first “local lockdown” applied by the UK Government, part of what it hopes will be an effective ‘whack a mole’ strategy to contain local outbreaks of the virus without the need to shut down the entire economy.
Meanwhile, the US continues to grapple with coronavirus resurgence in the South and West, with at least 15 states pausing or reversing plans to open, including Texas, Arizona, Florida and North Carolina. California, which ordered bars in a number of counties to close on Sunday, reported a 45% jump in cases over the past week, with Los Angeles becoming the new epicentre of the virus.
The head of the World Health Organisation, Tedros Adhanom Ghebreyesus, on Monday gave a stark warning that the worst could be yet to come with the virus on a global basis, urging governments to implement programmes of testing, tracking and quarantine.
Despite the clear link between economic reopening and virus resurgence, though, Asian markets were strong overnight into Tuesday, as investors looked at broader economic data, such as a record monthly rise in pending home sales.
WHAT ARE COMPANIES SAYING?
Consumer & Retail
New York’s theatres will remain suspended for the rest of the year, a producers’ organisation announced yesterday, citing effects of the coronavirus pandemic. The Broadway League announced that it would offer refunds and exchanges for tickets purchased for all performances until January 3, 2021. The league said it was working with authorities and unions to restart the schedule, incorporating screening, cleaning and way-finding inside theatres for audiences, and testing and other backstage protocols for cast and crew. Tickets for performances for next winter and spring are expected to go on sale in the coming weeks, the league said in a statement. League Chairman Thomas Schumacher said: “The Broadway experience can be deeply personal but it is also, crucially, communal”. Broadway performances were suspended on March 12, closing 31 productions that were running. Another eight shows in rehearsals have been postponed.
Under Armour underscored the challenges facing the US college sports industry as it moved to end outfitting deals with two leading university programmes worth hundreds of millions of dollars. The arrangements with the University of California, Los Angeles, and the University of California, Berkeley, were part of a marketing push by Under Armour in recent years to provide colleges with a mixture of cash and product in return for the right to outfit their sports teams. Both univeristies said they would contest Under Armour’s move to terminate the deals. Under Armour’s arrangement with UCLA was touted as the “largest apparel deal in history” of US college sports at the time it was signed in 2016, at a reported $280 million over 15 years. .a
Lululemon, the yogawear specialist, has agreed to pay $500m to buy Mirror, a home-workout equipment company backed by hedge fund manager Steve Cohen. Mirror, which was founded four years ago by a former professional ballet dancer, sells wall-mounted, internet-connected screens for $1,495 each before tax – plus a $39 monthly membership fee – and has become a popular alternative to the gym among well-heeled consumers.
The 45-year-old Australian swimwear and women’s beachwear fashion brand, fell into administration yesterday, in another retail collapse stemming from the coronavirus pandemic. The administration would trigger a “sale of business process”, Scott Langdon of KordaMentha, the voluntary administrator, said in a statement, citing the “crippling financial impact of the Covid-19 pandemic”. He said Seafolly would continue to operate its 56 stores in Australia, the US, Singapore and France: “Given the quality of the brand and its reputation, there will inevitably be a high level of interest in purchasing the business”. Seafolly is majority owned by US private equity firm L Catterton.
The hotel chain has reported that only 90 per cent of its hotels around the world are now open. The FTSE 100 listed company, which operates a string of brands, including Holiday Inn and Crowne Plaza, reported that revenue per available room, a key metric for hotel companies, had continued to improve, although it remains at historically low levels.
Industrials & Transport
The airline has cancelled orders for 97 Boeing aircraft and will claim compensation from the U.S. plane maker for the grounding of the 737 MAX and for 787 engine troubles that hit its bottom line. The airline cancelled 92 of the 737 MAX jets, five 787 Dreamliners and so-called GoldCare service agreements related to both aircraft, just as Boeing yesterday began a crucial set of flight tests of the 737 MAX in an effort to gain regulatory approval for it to return to the skies. Norwegian Air in a statement said: “Norwegian has in addition filed a legal claim seeking the return of pre-delivery payments related to the aircraft and compensation for the company’s losses related to the grounding of the 737 MAX and engine issues on the 787”.
BP has bolstered its balance sheet through a surprise $5 billion deal to offload its petrochemicals business to Sir Jim Ratcliffe’s Ineos. Shares in the oil giant rose 3.7% yesterday after it announced the sale of its remaining plastics manufacturing sites to Ineos. However, some City analysts warned the deal may not be enough to save BP’s dividend. BP, which reported profits of $3.5 billion last year, is under financial pressure after the coronavirus pandemic led to a collapse in oil prices, leading to widespread speculation that the indebted group could be forced to cut its dividend. The $8.5 billion-a-year payout is the biggest in the FTSE after Royal Dutch Shell slashed its dividend for the first time since the Second World War. Jason Kenney, analyst at Santander, said the sale was a “positive change” for BP and strengthened expectations that the company would not cut its dividend.
Royal Dutch Shell will cut up to $22bn from the value of its assets as the oil major warned coronavirus will deal a lasting blow to demand for energy products and the global economy. The Anglo-Dutch group cut its oil and gas price outlook today as it vowed to “ adapt to ensure the business remains resilient”. The company said as a result it believes it will see post-tax, non-cash impairment charges in the range of $15bn to $22bn in the second quarter. This will increase the company’s gearing by 3%. Shell’s move follows a similar announcement by BP earlier this month, indicating growing awareness among the biggest companies in the sector that tens of billions of dollars worth of assets could be rendered uneconomic.
The conglomerate that makes energy industry components, anti-terrorist scanners and medical devices, has announced a restructuring to cut costs and keep operating margins of 18-20%. It said that jobs would be lost but did not specify how many because it was consulting with its staff of about 23,000. Savings of about £70 million a year are expected, which would substantially offset costs for 2021.
Uber is preparing an offer to buy food delivery start-up Postmates, weeks after it was beaten in a race to acquire larger rival Grubhub, according to the Financial Times. The deal, which has been in the works for several days, could be reached as soon as this week, one of the people said. The proposed terms could not immediately be ascertained. A tie-up between Uber and Postmates would hasten the long-awaited consolidation of the heavily lossmaking US food delivery market. Demand has surged as coronavirus lockdowns have prompted people to turn to online dining and delivery apps.
IN THE NEWS
Boris Johnson’s ‘New Deal’ spending spree to boost Britain’s recovery from coronavirus – The Times
Leicester plunged back into lockdown as coronavirus cases surge – The Telegraph
Johnson seeks to channel FDR in push for UK revival – Financial Times