Powerscourt

By Powerscourt on 21/07/2020

Powerscourt Coronavirus Briefing – 21 July 2020

ANALYSIS

You wait five months for a coronavirus vaccine and then three promising candidates come along on the same day.

A trio of organisations on Monday reported encouraging data in separate coronavirus vaccine trials, moving a vaccine from the top of every world leader’s wishlist to something that could be with us inside a year. 

First, the so-called Oxford Vaccine returned positive early stage results on Monday. A Phase 2 trial of the vaccine, developed at the University of Oxford in 1,000 healthy adults, stimulated a “robust” immune response, the authors of the study said in data published by The Lancet.

The data is early stage and there are questions as to its efficacy over long periods and with high-risk groups. But signs of efficacy from one of the most promising vaccine candidates so far have cheered politicians and scientists. Late stage trials are underway in South America and South Africa.

A second development programme, a collaboration between German biotech BioNTech and pharma giant Pfizer also returned promising results Monday. These are very early stage trials in a highly experimental vaccine which uses as yet untried technology but the data added to the sense of scientific momentum. A third vaccine candidate being developed by Chinese biotech CanSino Biologics also returned promising safety and efficacy in a larger, also early stage, vaccine study.

There’s good news on the stimulus front as well, it seems, as European leaders appear to have broken a days-long deadlock over a EUR750 million cash injection to support economic recovery in the bloc.

Meanwhile, the virus infection rates in Europe, which had been on a steady downward trajectory for the past six weeks, have ticked up alarmingly in some pockets. Authorities in Spain have begun imposing restrictions to people attending bars and nightclubs after a number of regions reported infection spikes.

In the US the continued surge of coronavirus appears to be finally getting to President Trump, who is reviving his daily media briefings at the White House, an apparently tacit recognition of the fact that the US is not containing the spread of the infection.

The move comes as signs grow that his handling of the crisis could swing the November election in the favour of his Democratic rival, Senator Joe Biden. Senior Republicans are beginning to close ranks against him, according to the New York Times. Teachers unions on Monday said that they would sue the Florida governor, Ron de Santis, challenging the emergency order he has issued forcing schools to reopen.

In a powerful symbol of how the virus appears to have dented America’s global capital and financial power, Jack Ma’s Ant Group, the Chinese technology and financial services giant, announced late Monday that it planned to IPO on the Hong Kong and Shanghai exchanges, bypassing the US.

And finally, the biggest winner from the virus appears to be Amazon boss Jeff Bezos who has an extraordinary day on Monday when his personal fortune increased by $13 billion as his share price advanced almost 8%. It may be the largest single day increase in wealth in history.

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

Ted Baker
The global fashion brand said in a trading update ahead of its AGM today that trading had been “resilient”, supported by strong online performance since the start of the year. It said that overall trading had been ahead of its “base case scenario” provided at its results in June, with e-commerce sales up 35% and representing 69% of retail sales compared to 25% in 2019. It also said that it had made good progress with it’s three-year transformation. The company did note that for the 11 weeks to 18 July, retail sales fell by 50% and store revenue decreased by 79%, but that this compared positively with the base case scenario of an 83% fall in store revenue. The company is not giving further guidance, but did highlight a strong balance sheet. 

 

Industrials & Transport 

Posco
The South Korean company and world’s fifth-largest steel maker reported an operating loss in Q2 of Won108bn. This compares to an operating profit of Won724.3bn in the same period a year earlier. However, the company said that it expects earnings to improve in the Q3 as steel prices recover after hitting a low in April. Despite the loss, shares in Posco rose 1.9 per cent based on the improving outlook. The company said in its statement “We plan to improve our profitability by expanding exports to China, where demand is recovering, and by increasing sales of high-value-added products such as auto steel plates and steel products for solar energy production facilities”

BHP
The world’s biggest mining company has warned in its operational review today of lower production in the year ahead because of the impact of Covid-19 on its copper business and falling demand for gas. The company said it expected copper and petroleum output to decline by 13 per cent and 14 per cent respectively in the year ending June 2021. It said that production at its Escondida copper mine, the world’s largest, could be down as much as 21 per cent. It also said expected to see production volumes decrease in its petroleum business to between 95m and 102m barrels

Volvo
Volvo cars posted a loss of SKr1.2bn (£103m) for the first half of the year as it saw the impact of Covid-19. The company said that sales fell by 20 per cent to 270,000 cars. The group has reopened every major factory outside the US during Q2, however demand has yet to recover to pre-Covid-19 levels. It did however note that sales of its “Recharge” hybrid models rose by three quarters, accounting for 25% of Volvo sales in Europe and 10% in the US. CEO Hakan Samuelsson said that “we expect to see a strong recovery int he second half of ht year and our Recharge range of electrified cars puts us in a strong position to meet the merging trends we are seeing.”

 

Financials & Real Estates

UBS
Swiss bank UBS has said in a trading update that profits in Q2 fell by 11% compared to a year earlier. The company reported a profit of $1.2bn, partly thanks to a 43% surge in profits at its investment bank, but said that it had added $272m of loan loss provisions. That brings its total to $540m for this year as its clients are exposed to the impacts of Covid-19. The company did however say that it was considering resuming dividend payments and share buybacks at the end of the year. CEO Sergio Ermotti said that the company remained focused on its “strategic priorities”.

Intermediate Capital Group
FTSE 100 asset manager ICG reported today that assets-under-management were up 1 per cent to €46.5 billion in the three months to the end of June. The company said that it’s existing portfolios were performing well with a indications of a recovery in valuations and that investment activity was rebounding as Covid-19 restrictions ease. It invested €2.4bn of new deals in exclusivity and raised €1.2bn of new money in the first quarter. CEO Benoit Durteste described the update as “encouraging” and that the business is “approaching this market from a position of strength”

Royal Bank of Scotland
The owner of NatWest told the majority of its staff, over 50,000, that they will be working from home until next year. While the update covers global operations, most of those impacted will be in the UK. A spokesman for RBS said “Like we’ve done throughout the pandemic the decision has been made carefully, including considering the latest guidance from the UK Government on Friday and our own health and safety standards and procedures. It’s a cautious approach but we feel the right one to take currently.”

 

TMT

Talk Talk
The telecoms business said that it had seen a contraction in revenue in Q1 to £358m compared with £387m in the same period last year, as a result of Covid-19. However, the company said that it had seen a recovery in trading in June and July and the expect ARPU to continue to improve driven by Ethernet and Fibre products. The trading statement today said that their expected FY21 impact of Covid-19 of £15m remains conservative. The company said that B2B had proved particularly resilient with Ethernet levels now back from lower levels and with outlook remaining strong for the rest of the year

Euromoney Institutional Investor
The B2B information business said in a ‘nine-month trading update’ that the company had made “excellent progress” controlling costs and will return to running face to face events when restrictions are lifted by governments. It said Revenue for the nine months to 30 June was £255.4m, down from £295.8m in 2019, with event cancellations due to Covid-19 reducing revenue growth by 16ppt. The company said its financial position “remains strong” with a robust balance sheet and cash supports in place.

 

IN THE NEWS

EU leaders strike deal on €750bn recovery fund after marathon summit – Financial Times

UK government borrowing hits record in first quarter of financial year – Financial Times

Oxford aims for coronavirus vaccine this year – The Times




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