Friday 03/04/20

  1. In MACRO & OIL NEWS, the US has disastrous jobless figures, UK borrowers offer payment relief, Turkey faces more lockdown pressure and oil rises on deal hopes
  2. In CORONAVIRUS “WINNERS” & LOSER NEWS, Chinese apps profit, gaming surges and Amazon hires 80,000 but Land Securities cancels dividend on low rent payments
  3. In INDIVIDUAL COMPANY NEWS, SoftBank cancels $3bn WeWork deal and Luckin Coffee has dodgy figures
  4. In OTHER NEWS, I bring you some lockdown activity ideas…



So US jobless figures are horrendous, UK borrowers get relief, Turkey faces more lockdown pressure and oil jumps on deal hopes…

US jobless figures worst since the Great Depression (Daily Telegraph, Tom Rees) highlights the tough employment situation in the US right now as the number of Americans applying for unemployment benefits doubled in the week ending March 28th to just under 7 million. Some economists are forecasting that this could rise to 20 million as the lockdowns take hold and that the unemployment rate will reach 16% in the next few months – a level not seen since the Great Depression in the 1930s. 80% of Americans are now in lockdown. * SO WHAT? * This is of course a terrible state of affairs – but forecasts are just that, forecasts. These numbers can vary widely and will be subject to many changes over the days, weeks and months. America has gone for boosting unemployment benefits to help individuals (those who have been laid off can get up to $600 a week for four months) whereas many European countries have taken a different approach by paying a proportion of furloughed workers’ wages to save jobs. It remains to be seen as to which approach will save the most jobs in the long run.

Loan and credit card payments to be frozen for three months in the UK (The Guardian, Kalyeena Makortoff) is good news for those in debt as the Financial Conduct Authority has announced plans to freeze loan and credit card payments for up to three months – and could come into force as soon as April 9th. This action is designed to help people who have not benefited from other measures targeting homeowners (mortgage payment holidays) or business owners. Lenders would also have to waive interest charges on agreed overdrafts of up to £500 over the same period. * SO WHAT? * This sounds good, but the

proof will be in the execution and how easily this can be accessed. As Tesco might say “Every little helps”!

Meanwhile, Erdogan under pressure as Turkey’s coronavirus toll mounts (Financial Times, Laura Pitel) looks at what’s going on re the coronavirus in Turkey. The pressure is currently ratcheting up on President Erdogan to impose a nationwide lockdown, but he seems to be unwilling to change his stance from the one he outlined in a speech to the nation on Monday where he said “Turkey is a country where production must continue and the cogs must keep turning under every circumstance and every condition”. The number of cases has been growing rapidly over the last three weeks and is higher than what China, Italy or Spain had at the same stage. So far, the government has shut down schools and universities, put in place intercity travel restrictions and put people over 65 under lockdown. * SO WHAT? * Clearly, this is far from ideal. However, on the plus side, Turkey has a young population and a healthcare system that has seen big improvements since Erdogan came to power 17 years ago. However, it has a lot of multi-generational households where the virus could spread from kids to grandparents. As things stand, the testing rate is low and lockdown is limited – so you can understand why the pressure to change is increasing.

Oil price rebounds on hopes Saudi Arabia and Russia will reach deal (The Guardian, Jillian Ambrose) shows that global oil prices jumped to over $30 a barrel on hopes that Saudi Arabia and Russia will end the current price war. Trump tweeted (what else?!) that he had spoken to both sides and expected them to cut production by up to 15m barrels a day and that this “will be GREAT for the oil & gas industry”. Unfortunately, Trump’s apparent exuberance was tempered somewhat by Russian president Vladimir Putin who later told journalists that “no one has started talking about any specific or even abstract deals”. Still, maybe this is just a case of Vlad wanting to look like the great statesman and being a bit miffed that Trump got there first. This is not necessarily the end of oil hostilities…



Chinese apps and gaming see a major uptick and Amazon employs 80,000 while Land Securities suffers from a lack of rent…

Chinese apps profit from millions staying at home (Financial Times, Ryan McMorrow and Henny Sender) highlights a few apps in China that have benefited from the coronavirus lockdown. Podcasting app Lizhi, which has 52m listeners, has seen a big increase in revenues as listeners have been buying more virtual gifts for their favourite podcast hosts (this accounts for 99% of the company’s revenues). ByteDance-owned Douyin (the Chinese version of TikTok) is making money from online ads and virtual gifts in addition to e-commerce and gaming. Bilibili, similar to YouTube, is expecting to have its strongest ever first quarter and Taobao Live, owned by Alibaba, saw a massive spike in new merchant livestreamers. Kuaishou, which is backed by Tencent, has been so successful at monetising live streaming that it is now becoming a major competitor to Tencent’s own WeChat. * SO WHAT? * It’s interesting to see how companies have been monetising their huge online audiences. The likes of Facebook, Google and Twitter have been trying to monetise their user bases by increasing advertising but Twitter and Facebook have already warned investors to expect a hit in ad revenues as advertising spend is cut (this is one of the first company expenditures to go in a downturn). Maybe the Americans will see if they can learn anything from their Chinese counterparts…

Gaming firms enjoying surge after workers make the most of more time at home (Daily Telegraph, Chris Johnston) highlights a number of industries that have benefited from

the outbreak and resulting home confinement. MIDiA Research says that the average commuter has about 15% more free time these days and says that 63% more games were sold in the week to March 22nd versus the previous week, due in part to the release of Nintendo’s Animal Crossing: New Horizons. Video streaming has seen a 20% rise in consumption – and Disney seemed to time their UK launch to perfection as it went live when all the schools started to close! Radio has seen a surge in listeners and music streaming has also benefited, although there is a danger that the number of paying subscribers will fall in the event of a recession as they opt for the free “with ads” service instead. * SO WHAT? * It’s great that some of these areas are seeing a pickup in activity but it will be interesting to see whether the initial frenzy will subside once the coronavirus outbreak gets under control. If people are, say, watching more films than they normally would do, I do wonder whether they will stay on platforms for less time and switch to others when they have had their fill of superhero movies (just as an example!).

Meanwhile, in retail, Amazon has hired 80,000 workers amid soaring demand during coronavirus outbreak (Wall Street Journal, Sebastian Herrera) highlights an incredibly quick recruitment process by the giant e-tailer which is speeding towards its target of adding 100,000 workers to cope with surging demand. It has announced a number of additional worker protections following increasing employee concern.

On the other hand, British retail landlords continue to suffer as per Land Securities cancels dividend as tenants fail to pay a third of rent (The Times, Louisa Clarence-Smith), which follows recent news of others in the retail space. Only 41% of rent due from retailers was paid versus 86% for office tenants and 12% from specialist occupiers. Tough times.



SoftBank goes cold on WeWork and China’s Luckin Coffee gets in trouble…

SoftBank calls off $3bn WeWork deal (The Times, Tom Knowles) shows that WeWork’s biggest investor, Japan’s SoftBank, has decided to abandon an offer to buy $3bn of extra shares. This deal, agreed in October, brought the office space provider back from the brink of insolvency and was to be an additional investment to the $10.5bn that it had already invested in it. The company cited unmet conditions of the deal, criminal and civil inquiries into WeWork and its failure to restructure a joint venture in China. Anti-coronavirus measures leading to more people working from home will have been the final nail in the coffin. * SO WHAT? * I think that this is a nightmare for the company. SoftBank’s reticence when it has already committed so much to the company speaks volumes and this move will shake the confidence of other investors that would have been comforted by having SoftBank as a

bedrock. WeWork has huge debt but it remains to be seen whether others in the space will fare any better given the likely failure of many SMEs etc. Any larger companies who have taken on extra space for expansion could well cancel their contracts, I would have thought, given that they may well be axing staff and need less space.

Luckin Coffee plunges on internal probe into ‘fabricated’ sales (Finanical Times, Alistair Gray, Peter Wells and Neil Hume) shows that things at Starbucks’ fast-growing competitor in China may not be all they seem to be as an internal investigation found that hundreds of millions of dollars of sales last year were “fabricated”. This astounding revelation knocked 75% off the company’s share price yesterday. Luckin Coffee listed on Wall Street less than a year ago. The COO has been suspended. * SO WHAT? * This is lying on an epic scale. Apparently, sales were fabricated while costs and expenses were also “substantially inflated”. This is an absolute shocker as it had been touted as China’s answer to Starbucks, but it seems that all the expansion has been built on lies. Will this play out publicly or will China want to try to sweep it under the carpet? 



And finally, in other news…

I thought I’d finish on a few ideas for you to try during lockdown in 25 things to do while you’re stuck at home during the coronavirus lockdown (The Mirror, Daisy Naylor Enjoy!

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)