Powerscourt

By Powerscourt on 14/10/2020

Powerscourt Coronavirus Briefing – 14 October 2020

ANALYSIS

Governments and drugmakers have sought to emphasise speed and efficiency as they marshal scientists against the coronavirus. The US’s accelerated vaccine development programme, for example, was dubbed “Operation Warp Speed”.

But this belies the reality of scientific discovery which is, at best, an unpredictable and expensive rollercoaster of hope and fear. This truth came into sharp focus when two COVID-19 drug trials were halted on Tuesday, a reminder that there is no smooth scientific road to tackling the virus.

Johnson & Johnson stopped its COVID-19 vaccine studies after one of the people on a trial developed an “adverse reaction”, the company said on Tuesday. AstraZeneca stopped a vaccine trial in September when at least one participant developed unexplained neurological symptoms. That trial has restarted in the UK but not yet in the US.

US drugs giant Eli Lilly on Tuesday said it was halting enrolment for an antibody treatment similar to the one taken by US President Donald Trump during his bout with coronavirus, and which Trump had hailed as a “cure”.

This drug, being tested by the National Institutes of Health, had been shown to reduce viral load in early-stage COVID-19 patients. But Lilly confirmed that independent safety experts monitoring the trial have recommended a “pause in enrolment”, a recommendation the company has accepted.

So far, Asian nations have managed the virus with more success than the West and this has not escaped the attention of global investors. The Financial Times on Wednesday reports that the total value of China’s stock market has reached a record high of more than $10 trillion as investors increasingly buy into the region’s accelerating ascendancy in its recovery from coronavirus.

Data on Wednesday showed the value of Chinese imports hit a record amount on a strong appetite for commodities and semiconductors, with the renminbi strengthening against the dollar.

The Chinese city of Qingdao is testing all of its nine million citizens for COVID-19 this week after the discovery of a dozen new cases of the virus, believed to have come from abroad. A similarly comprehensive programme helped the Chinese stamp out the first wave of the virus – which originated in the Chinese city of Wuhan – earlier this year.

The apparent efficiency of Chinese authorities is in stark contrast to those in the US and Europe, where many countries are still struggling to implement effective testing programmes.

In the UK, Prime Minister Boris Johnson is under mounting pressure to impose a brief “circuit breaker” lockdown, as virus infection numbers continue to rise and amid pressure from scientists.

From midnight tonight, the UK’s new three-tier alerts system comes into effect, with people in some areas of the UK, such as Liverpool, subject to significant restrictions on their movements and a near shutdown of hospitality. There is widespread speculation that this is an overture to the imposition of more stringent curbs on the whole country. Scientists who advise the UK government urged a nationwide lockdown three weeks ago, a recommendation apparently over-ruled in the interest of supporting the economy.

Some of the UK’s regions are now lobbying government to implement a short national lockdown. Press reports on Wednesday say Northern Ireland is on the brink of announcing a four-week shutdown which will include the closure of pubs and restaurants for four weeks and schools for two. Wales’s first minister, Mark Drakeford, has publicly pushed the Prime Minister to consider the same approach and has sought to restrict the movement of people travelling from English virus hotspots – such as Liverpool – into Wales.

The leader of the Opposition Labour Party, Sir Kier Starmer, has also called for a short national lockdown. Having earlier largely toed the government line on strategy to control the virus despite arguing tactics were ineffective, Sir Kier is now opposing the government on its overall approach. In a press conference on Tuesday he said the government needed to take action to prevent “a sleepwalk into… a bleak winter”.

Despite the more positive overall economic sentiment towards Asia, stock markets in the region stalled Wednesday.

 

WHAT ARE COMPANIES SAYING?

 

Industrials 

G4S
The security company said its group revenues were 2% lower overall than 2019, which it offset by tight cost control and reduced interest costs. CEO Ashley Almanza said: “The benefits of our strategy, strong execution and rapid response to Covid-19 continue to be reflected in the Group’s results during 2020 with resilient revenue, earnings and cash flow.”

Bunzl
The group reported revenue up 4%, citing continued growth in COVID-19 related products, including masks, sanitisers, gloves and disinfectants. The group said that sales of such products have more than offset the impact of weak economic activity.

 

Financials & Real Estate 

JP Morgan
America’s largest bank beat expectations with its Q3 results, reporting a surprise rise in profits and a lower than predicted sum set aside to cover likely pandemic-related loan defaults. CEO Jamie Dimon said: “Despite significant uncertainty in the environment, the Firm is unwavering in its commitment to drive an inclusive economic recovery, advance sustainable solutions to address climate change and improve the lives of our customers, especially those in underserved communities.”

BlackRock
The world’s largest fund manager reported yesterday that its assets under management have hit a record $7.8 trillion. Chairman and CEO Larry Fink said: “As investors around the world navigate current uncertainty, including the pandemic and uneven economic recovery, BlackRock is serving clients’ needs with global insights, strategic advice and whole-portfolio solutions. BlackRock generated $129 billion of total net inflows in the third quarter, representing 9% annualized organic base fee growth.”

Barratt Developments
The housebuilder said its sales rate in the past three months was up more than 20% on the same period last year and its home completions were up 24%. The company is continuing to operate sites including in areas of local lockdown. CEO David Thomas said: “As we look ahead, whilst significant economic and political uncertainties persist, we believe our disciplined approach and strong balance sheet provide us with the resilience and flexibility to react positively to future challenges.”

MJ Hudson
The asset management consultancy said a revenue shortfall emerged in April to June due to the suspension of client new fund launches and M&A activity, but that the shortfall had closed considerably in recent months. CEO Matthew Hudson said: “We should not ignore the risk posed by a sustained Coronavirus pandemic and its impact on global stock markets and investing, as well as business confidence, but we remain cautiously confident about the Alternatives industry we serve and the strength of our multi divisional business model in the current financial year.”

PageGroup
The recruitment group’s gross profit fell but the group reported improving trading conditions during the quarter. The group said it continues to protect and invest in its platform in order to take advantage of the recovery. CEO Steve Ingham said: “We know the future remains unpredictable, but we believe now is the right time to continue to invest in our flexible and highly diversified business model. Having seen conditions improve through Q3, we now look forward to driving improved activity and gross profit in Q4.”

 

Retail & Consumer

ASOS
The online fashion retailer reported strong sales growth and an increase in its active customer base of more than 3m customers. The company has seen a ‘solid start’ to the new financial year but is ‘retaining caution’ on outlook while the economic prospects and lifestyles of young people remain affected. CEO Nick Beighton said: “As well as protecting staff, suppliers and customers, we’ve driven efficiency and have emerged a stronger, more resilient and agile business whilst delivering strong profit and cash generation.

Stock Spirits
The spirits company reported that trading for the year was ahead of expectations, with the impact of COVID-19 in the second half being less than initially anticipated. It said a strong off-trade performance was in part driven by on-trade restrictions and that its brands had benefitted from the trend towards staycations. 

 

TMT

Pearson
The learning company reported a 14% fall in sales. COVID-19 resulted in cancelled tests and closed schools, though this was partly eased by an increased demand for digital learning. CEO John Fallon said: “This has been a challenging transformation for all of us but we are starting to see the benefit of all our work to ensure Pearson becomes the winner in digital learning.”

 

IN THE NEWS

IMF warns of long road to recovery – THE TIMES

Bailey warns scourge of long-term unemployment threatens workers – THE TELEGRAPH

Hedge fund short sellers target pandemic winners – FINANCIAL TIMES




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