By Powerscourt on 06/07/2020
Powerscourt Coronavirus Briefing – 06 July 2020
Two records this morning: the World Health Organisation said Saturday was the worst day thus far for news cases (212,236); and Chinese stock markets had their best day in at least a year on Monday with Shanghai up 5%. State media strongly encouraged the buying.
India, Iran, Indonesia, South Africa, the Philippines and parts of the US all helped those record WHO figures.
Meanwhile, the future of coronavirus containment is local. Around the world, outbreaks are being tackled at a local level and governments are hoping this can cut them off at source and prevent the damaging need for national lockdowns. But the impact continues to resonate on whole countries.
Australia and Spain are two of the latest countries where officials are putting local containment strategies in place after identifying outbreaks. Australia has sealed the border between the states of Victoria and New South Wales for the first time since 1919 after an outbreak at a housing project in Melbourne, with around 127 new cases announced on Monday. Parts of Galicia, on the border between Spain and Portugal, have also put a lockdown in place in La Marina, where around 70,000 people will be confined to their homes for everything other than essential travel for a week from Sunday. This is the second such lockdown in Spain in the past two days: 20,000 have been confined in Catalonia.
In the United States, the Fourth of July weekend was a damp squib after fears the typically exuberant celebrations would fuel the coronavirus resurgence that is already raging there led to municipal authorities cancelling many planned barbecues and parties at the last minute.
The morning after “Super Saturday”, the first time the pubs in the UK opened since late March, there was a familiar chorus of disapproval in the newspapers over the British public’s perennial inability to drink in moderation and the predictable corollary: drunks can’t socially distance. Photographs of people packing the streets of Soho, London, and young men being borne aloft by their friends were balanced with stern reproaches in the newspapers from pub owners saying the industry was finished if the UK public couldn’t contain its desire for an unconstrained bacchanal.
Relaxation can’t come soon enough, though, for the UK’s battered arts industry. On Sunday evening the Chancellor, Rishi Sunak, announced plans for a £1.6 billion lifeline for the arts and heritage sector amid warnings that the entire sector would be wiped out without emergency funding. The cash, which was welcomed by the sector, will mean survival for many venues and establishments, but it will not be enough to prevent the closures of several theatres. The UK opposition said it was “too little, too late”.
Sir David King, a former head of the scientific adviser to the UK government, SAGE, had a more ominous warning, about the impact of the government’s approach to restimulating the economy however, suggesting on Sky News that the government’s approach to relaxing restrictions may be based on an undeclared policy of “herd immunity” – something which was widely speculated to be driving policy in March – and projecting that it could cost an additional 27,000 lives between now and next April.
Asian markets opened strongly on Monday, with the Chines blue chip MSCI’s broadest index of Asia-Pacific shares outside Japan and the Nikkei both up 1.5% early Monday.
WHAT ARE COMPANIES SAYING?
Consumer & Retail
Pret A Manger
Pret A Manger’s 8,000 UK staff will learn if their jobs are safe or not this week as the fast food chain weighs up how many of its stores it can keep open. Pano Christou, Pret’s Chief Executive, said at the weekend that as many as one in ten of its 410 UK stores may shut as the company battles for its survival. The bleak outlook was revealed by Christou, who said he was having “sleepless nights” about the impending cuts, as it emerged that 56,000 jobs have already been affected across the retail industry by the pandemic. In an interview with The Sunday Times, Christou said the collapse in trade that the pandemic has caused could see “5 percent to 10 percent of our stores close in the UK”
Boohoo is under pressure to explain how an “undeclared” supplier came to be making garments for the fashion retailer while allegedly paying staff as little as £3.50 an hour and flouting social distancing rules. A Sunday Times investigation revealed that a factory in Leicester was running during the local Covid-19 lockdown last week without safety measures in place and while paying staff illegally low wages. An undercover reporter recorded covert video footage of himself packing clothes branded as Nasty Gal, which is owned by Boohoo, at a plant where staff claimed they were being routinely exploited. The journalist spent two days working in a factory operating under the Jaswal Fashions name, where he was told he would be paid £3.50 an hour. The minimum wage in Britain for people aged 25 or over is £8.72. The company, which could be facing an investigation under the Modern Slavery Act, admitted yesterday that it was unaware of who was producing the garments for it. Boohoo said: “Our early investigations have revealed that Jaswal Fashions is not a declared supplier and is also no longer trading as a garment manufacturer…It appears that a different company is using Jaswal’s former premises and we are trying to establish the identity of this company…We are taking immediate action to investigate how our garments were in their hands, and we will ensure our suppliers immediately cease working with this company”.
Cineworld has said that it will initiate a counter-claim against Cineplex, the Canadian group that it had planned to buy, for damages and losses it has suffered “as a result of the smaller chain’s “breaches and the acquisition not proceeding”. Cineplex initiated proceedings against Cineworld after the second-largest cinema chain called off the $2.3bn sale that was due to be completed last month, alleging that Cineworld had breached its agreement obligations. Cineworld said it had not breached any of these obligations.In a statement today, Cineworld said: “In any event, Cineworld believes that Cineplex’s claim, if successful, would be limited to its costs and expenses incurred in relation to the acquisition and would not be assessed by reference to the consideration that was payable under the acquisition”. Cineworld, the world’s second-largest cinema chain, called off the deal on June 12, saying that Cineplex had suffered a “material adverse effect”, which meant the acquisition could not go ahead. Under the terms of the deal, the sale would not proceed if Cineplex breached a level of $725m debt. When it last reported figures in February, Cineplex had net debt of $625m. Cineplex claimed that it had not breached the sale agreement and “that a material adverse effect has not occurred”. The smaller cinema chain also claimed that Cineworld had not complied with the requirements needed in order for the deal to receive approval from the Canadian competition authorities.
Industrials & Transport
Royal Dutch Shell has hinted that it may move its headquarters from the Netherlands to the UK as it tries to simplify its complex capital structure. Ben van Beurden, the oil company’s chief executive, pointedly declined to rule out the plan in an interview at the weekend. A move to the UK would be a second vote of confidence in as many months after Unilever, the Anglo-Dutch consumer goods giant, revealed last month that it would merge its British and Dutch holding companies into one based in London. Asked whether Shell planned to follow Unilever, Mr van Beurden told the Dutch newspaper Het Financieele Dagblad: “One always needs to keep thinking. Nothing is permanent and of course we take the investment climate into account. But moving your HQ is not a trivial measure, one should not be too easy about that”.
Berkshire Hathaway said its energy unit will buy Dominion Energy Inc’s (D.N) natural gas transmission and storage network for $4 billion, helping billionaire Chairman Warren Buffett reduce his conglomerate’s cash pile while letting Dominion focus on utilities operations. The transaction announced on Sunday includes more than 7,700 miles (12,390 km) of natural gas transmission lines and 900 billion cubic feet of gas storage. Berkshire Hathaway Energy is buying Dominion Energy Transmission, Questar Pipeline, Carolina Gas Transmission, 50% of the Iroquois Gas Transmission System, and 25% of the Cove Point liquefied natural gas facility in Maryland. Warren Buffet said in a statement: ““We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business”.
Financials & Real Estate
Lloyds Banking Group
Chief Executive António Horta-Osório is to step down in 2021 after 10 years stewarding the high street bank through the aftermath of the financial crisis and its return to private ownership after 2008’s bailout. His departure is part of a changing of the guard at the bank. Lloyds today named Robin Bundenberg Chairman to replace Lord Blackwell, who announced his plans to retire from the bank last year. Horta-Osório said: “I have been honoured to play my part in the transformation of large parts of our business…I know that when I leave the group next year, it has the strategic, operational and management strength to build further on its leading market position”.
Aviva has replaced its Chief Executive after just a year. The insurer appointed Amanda Blanc, a non-executive at the group and former executive at Zurich and Axa, as its new boss. She replaces Maurice Tulloch, who Aviva said was stepping down for family health reasons. Blanc is an experienced insurance executive, having run Axa’s UK business and Zurich’s European operation. She was also the first female chair of the Association of British Insurers and joined Aviva’s board at the start of this year. Aviva Chairman George Culmer, who has only been in the role since last month, said: “I know she will bring real dynamism to Aviva and re-establish our credentials as a high-performing, innovative and customer-centric business.” She takes on the top job after a turbulent year for the insurer. Tulloch, who was appointed in March last year after a long search, presented a new strategy, but it disappointed some investors and the share price has struggled.Since then the group has been hit by the coronavirus crisis, which will cause big payouts in some lines of business. The company suspended its dividend earlier this year.
The UK’s largest housebuilder has called for an extension of the Help to Buy programme, with thousands of home purchases made using the scheme at risk of falling through because of construction delays caused by coronavirus. Barratt Developments, which built more homes than any other housebuilder last year, said the government’s loan scheme should be extended to “help ensure the UK’s housing recovery is sustained, capacity in the industry is maintained and to ensure that customers who planned to use the current Help to Buy scheme still can”. Research from the Home Builders Federation shows that close to 8,000 purchases made using the scheme were at risk of falling through because delays on building sites meant the homes would not be complete before April 2021, when the scheme runs out in its current form. From April onwards Help to Buy will be limited to first time buyers and prices will be capped at different levels in different regions. In its update to the market today, the company also announced that it would be returning money it had tapped from the government’s furlough scheme, and that remediation work on a number of its old developments – the need for which was identified in the wake of the fire at Grenfell Tower – was likely to cost £70m
The Dubai-based payment company, expects revenue of between $133 million and $134 million in the first half, representing a broadly flat first quarter and a 23 percent drop in the second. Across the year, it is expecting revenues to decline by between 17 percent and 20 percent – a knock Simon Haslam, Chief Executive, describes as “short-term disruption”.
IN THE NEWS
Stamp duty ‘holiday’ to help rebuild economy – The Times
Sunak gives £1.5bn lifeline to struggling arts sector – Financial Times
Soaring U.S. coronavirus cases, hospitalizations overshadow July 4 celebrations – Reuters