Powerscourt

By Powerscourt on 27/10/2020

Powerscourt Coronavirus Briefing – 27 October 2020

ANALYSIS

Leaders on both sides of the Atlantic are reacting differently to the surging cases of COVID-19 which drove down stock markets yesterday.

Angela Merkel, Chancellor of Germany, told colleagues in the Christian Democrat party: “We are facing very, very difficult months ahead.” Bild, Germany’s most popular newspaper, reports that she plans rolling “lockdown light” with bars and restaurants closing. The Spanish government faces strong resistance to its plan for a six month lockdown of the worst-hit regions while the Russian government warned that the pandemic is spreading from Moscow to provincial cities.

In the US, President Donald Trump, facing a general election next Tuesday, has a different approach to European leaders. Faced with rising infection rates and substantially increased hospitalisation, he tweeted his analysis: “Cases up because we TEST, TEST, TEST. A Fake News Media Conspiracy. Many young people who heal very fast. 99.9%. Corrupt Media conspiracy at all time high.”

Reuters contradicts his analysis, pointing out that the rate of new infections increased by 24% last week while the numbers tested increased by 5.5%.

Those who are pinning their hopes on herd immunity as a route out of the coronavirus crisis have been dealt a blow. An Imperial College London study has shown that a quarter of people who were infected in the first wave of the pandemic no longer tested positive for antibodies at the start of the second. In further bad news from Imperial, it appears that coronavirus survivors may be at risk of lasting cognitive damage. In the worst cases, infection can cause mental decline equivalent to an 8.5% fall in IQ said researchers.

MPs from the North of England have written to the Prime Minister Boris Johnson to warn him that his pledge to “level up” the nation is being undermined by the disproportionate impact of restrictions on their constituents. The newly organised Northern Research Group of more than 50 Tory MPs told Johnson that his party’s gains at the last election were in danger at the next. Meanwhile, another 900,000 people face tighter restrictions after Nottingham and Warrington moved into the top alert level.

Middle class and older workers face long spells out of work and pay cuts according to the Centre for Economics and Business Research. The middle class hit is starting now as companies prepare for the long haul by cutting management costs, said CEBR chairman Douglas McWilliams.

Prolonged remote working could threaten productivity and creativity in the long term according to the Bank of England’s chief economist. Andy Haldane said that fewer chance conversations, face-to-face meetings and introductions posed risks that may not yet be fully visible.

Asian stocks fell on Tuesday as investors were unnerved by the soaring cases and slow progress on a US stimulus deal.

 

WHAT ARE COMPANIES SAYING?

 

Industrials

BP 
BP, the British multinational oil and gas company, announces today its third quarter results. Despite the difficult environment, BP has reported a profit of £77m despite analysts expecting a loss of £92m for the quarter. The ongoing impacts of Covid-19 continues to create a volatile and challenging trading environment, however early signs of global economic recovery are beginning to show. Chief Executive Officer Bernard Looney says “Having set out our new strategy in detail, our priority is executive and, despite a challenging environment, we are doing just that – performing whilst transforming”. 

 

Financials & Real Estate 

HSBC
The multinational bank HSBC announced its third quarter results today reporting an unexpected 46% drop in profits after tax. The bank blamed the impact of the Covid-19 outbreak for their net interest margin drop of 1.20% compared to 3Q19. Based on 2020 results and forecasts for 2021, the Board will consider whether to pay a conservative dividend for 2020, which will be dependent on early 2021 economic outlook. Group Chief Executive Noel Quinn said “these were promising results against a backdrop of continuing impacts of Covid-19 on the global economy.”

St James’s Place
British wealth management business, St James’s Place, issued today new business inflows and funds for the three months ended 30 September 2020. Despite a challenging external environment, the firm reports gross inflows over the quarter of over £3.0 billion. Improved levels of activity towards the end of the quarter have continued into October with activity levels this year, being similar to the same month in 2019. CEO Andrew Croft said “looking ahead, the increased uncertainty linked to Covid-19 will inevitably influence client investment and confidence and consequent decision-making.”

Santander
Spanish bank Santander announced their third quarter results today, returning to profits and consequently upgrading its full-year forecasts. Revenues increased 18% as activity begins to return to pre-pandemic levels. Chief Executive Officer Nathan Bostock said “we remain firmly focused on supporting our customers, our colleagues and our communities through the Covid-19 pandemic” continuing to report that “Santander UK remains well placed given the decisive actions we have taken and the resilience of our balance sheet.”

 

Retail & Consumer

Whitbread
British hotel and restaurant company Whitbread, announces H1 performance today, in-line with expectations. With total statutory revenue being 99% behind the previous year, H1 financial performance reflect the closure of the vast majority of the groups businesses during the lockdown period. Following the initial lockdown period, 97% of the groups UK hotels being open by the end of July resulting in UK accommodation sales performance being ahead of the market since reopening.

Revolution Bars Group 
Revolution Bars Group, the leading operator of 73 premium bars trading across the UK, announces today that one of its subsidiary entities Revolution Bars Limited has launched a company voluntary arrangement. The decision comes after the UK Government’s enforced closure of bars in March 2020 to try and protect the Group’s ongoing viability. The proposed CVA will see RBL exit six bars and obtain improved rental terms on seven others.

 

TMT

First Derivatives 
Software company First Derivatives announces today H1 results for the six months ended 31 August 2020. The firm reports software license growth of 12% which drives total software revenue up to 4% to £74.4m. Chairman of First Derivative Donna Troy commented “During the period we have demonstrated the Group’s resilience whilst continuing to focus on the considerable opportunity ahead. It is clear that the use of data, particularly streaming operational data, to drive decision-making will become critical for enterprises and Covid-19 will accelerate this trend.”

 

Healthcare

Novartis 
Swiss pharmaceutical company Novartis announced today positive Q3 performance of 11% growth of core operating income, upgrading full year core operating income guidance. Vas Narasimhan, CEO of Novartis said “Norvatis continues to deliver solid performance with double digit increases in core operating income and expanding margins, despite the impact of Covid-19 on healthcare systems.”

 

IN THE NEWS

Fresh coronavirus vaccine hope as elderly respond well – THE TIMES

Global stocks drop after US Covid-19 surge sends Wall Street lower – FINANCIAL TIMES

Northern Tory MPs demand ‘clear roadmap out of lockdown’ – THE TELEGRAPH




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