- In MACRO NEWS, the ECB increases its bond-buying and we look at reactions to Germany’s stimulus package
- In NEWS ON WINNERS & LOSERS, winners include US airlines and Fever-Tree while losers include Aston Martin, Odeon and ASK/Zizzi
- In INDIVIDUAL COMPANY NEWS, Vegas aims to open, LVMH considers its purchase of Tiffany’s, TikTok goes political and AstraZeneca takes a big risk
- AND FINALLY, I bring you the correct way to store food…
So the ECB increases bond purchases and we look at reactions to Germany’s big stimulus package…
ECB boosts bond-buying stimulus package by €600bn (Financial Times, Martin Arnold) heralds the release of an extra $600bn of bond-buying firepower – which takes the ECB’s Pandemic Emergency Purchase Programme (PEPP) to a total of €1.35tn – and an extension of the scheme until at least June 2021. ECB chief Christine Lagarde said this was designed to “bring us closer to the pre-Covid inflation path” but some governing council members, including Bundesbank boss Jens Weidmann, warned that making the programme pretty much open-ended could put it at risk of breaking the EU rules on the monetary financing of governments. ECB’s €600bn bond blitz escalates chances of German court showdown (Daily Telegraph, Ambrose Evans-Pritchard) points out that this latest move is a slap in the face for Germany’s constitutional court in Karlsruhe who recently ruled that the Bundesbank should not contribute to the massive programme because it is effectively a fiscal rescue in disguise and is outside the law. The court said that it would only allow contributions to continue if the ECB can support its actions under the “proportionality principle” and it has until early August to do so. Lagarde batted away criticisms by saying that the ECB was under the jurisdiction of the European Court of Justice, which ruled in 2018 that its bond-buying actions were legal. * SO WHAT? * In the worst case scenario, it would still be
possible for the ECB to continue without the support of the Bundesbank, but it would be much more difficult and would be very damaging to its credibility. The drama continues…
Following on from what I was saying yesterday about Germany’s hefty bailout package, German-style VAT cut can hasten UK recovery, says think tank (Daily Telegraph, Tim Wallace and Russell Lynch) suggests that the UK may do well to copy this VAT cut (Germany is cutting its VAT from 19% to 16% temporarily as part of the stimulus package) to boost growth and Boris Johnson’s former economic adviser, Gerard Lyons, actually advises going further by saying that it should also rule out tax increases and cut stamp duty on house purchases. VAT was cut in the past in the aftermath of the financial crisis, so it’s not like this has not been done before, but it would probably need an end date as well so that consumers were aware that it was “for a limited time only”, giving them a reason to spend. On the subject of the German package, German car industry slams Berlin stimulus package (Financial Times, Joe Miller) shows that not everyone was a fan of Merkel’s pronouncements – the German automotive industry is annoyed that that subsidies only applied to electric vehicles and that it refused to reinstate a scrappage scheme. Given that sales of petrol and diesel cars account for over 90% of sales in the country, you can see their point. * SO WHAT? * I think that VAT cuts are quick to implement and are generally crowd-pleasers because they affect a wide variety of goods. OK, so the subsidies are for EVs only, but a VAT cut on a “normal” car is still going to be worth something, right?? I think EVs need subsidies the most and if you’ve got limited resources, that’s where they should go. Like I said, other cars will still get the VAT benefits.
NEWS ON WINNERS & LOSERS
US airline stocks take off and Fever-Tree is in the mix but Aston Martin, Bentley, Odeon and Zizzi have a tricky time…
So…in the winners corner today we have US airline shares surge as American and Virgin add flights (Financial Times, Claire Bushey and Bethan Staton) which highlights the reaction to American Airlines after it announced that it would be flying over half of its domestic flight schedule in July (its shares shot up by over 40%!), although United, Delta and South West saw pretty chunky gains as well (albeit not as chunky as American’s!). Virgin Atlantic also announced flight plans with five international routes recommencing from Heathrow in mid-July. In the meantime, European holiday destinations push for UK ‘travel corridor’ (Financial Times) shows that European holiday destinations such as Turkey, Greece, Spain and Portugal are trying to get ‘transport corridors’ sorted by next month as a way to get around the 14-day quarantining requirement. * SO WHAT? * This all sounds like progress, but the success of it all will obviously depend on whether people spend their money on going abroad!
We do hear an awful lot of depressing news about the effects of the coronavirus on industries and businesses but Fever-Tree toasts jump in demand from home tipplers (Daily Telegraph, Simon Foy) is a piece of good news as
the premium tonic-maker has seen a 25% increase in sales through shops and supermarkets which has helped to mitigate the loss of sales from bars and restaurants. It also reported that US sales almost doubled from mid-March to mid-May in the US. * SO WHAT? * This is great news for the tonic-maker as things had been waning somewhat leading into the coronavirus outbreak. The question is whether this positive momentum can continue or whether it was more of a brief “holiday romance”…
On the other hand, Aston Martin and Bentley to axe 1,500 jobs (Daily Telegraph, Alan Tovey and Simon Foy) highlights up to 1,000 job cuts via voluntary redundancy at Bentley Motors and 500 job losses at Aston Martin as it restructures under new management. The latter move follows swiftly after the departure of former Aston Martin CEO Andy Palmer. Will this be enough and will their well-heeled customer base pull them both through?
Then there’s also trouble ahead in ‘Substantial doubt’ over Odeon’s future, says owner (Daily Telegraph, Vinjeru Mkandawire) where the owner of Odeon cinemas, American company AMC Entertainment (the world’s biggest cinema operator), said that any delays to cinema openings would mean “substantial doubt” for its future. In ASK and Zizzi owner weighs sale as Covid-19 bites (Financial Times, Antonia Cundy) we see that private equity firm Bridgepoint is considering a sale of all or part of the Azzuri Group – which comprises of ASK Italian, Zizzi and Coco di Mama – as prospects of the casual dining sector continue to look even more grim than they did before the coronavirus outbreak. Tough times.
INDIVIDUAL COMPANY NEWS
In a roundup of other interesting news today, gambling fans will be pleased to see Las Vegas casinos reopen with social distancing, sinks by slot machines (Wall Street Journal, Katherine Sayre) as casinos take extra measures to ensure the safety of their customers and staff in order to reopen their businesses. Wyn, Caesars Palace, Bellagio, the Venetian, New York-New York and Treasure Island are among the venues expected to reopen after casinos were shut down in mid-March. Nightclubs and big shows remain closed.
Takeover of Tiffany’s has lost its shine with LVMH (The Times, James Dean) sounds the alarm for Tiffany’s as luxury goods giant LVMH is reconsidering its previous offer of $16.2bn to buy it following the coronavirus pandemic. LVMH has, however, ruled out buying Tiffany shares on the open market even though they are currently trading at way below the offer price. So far, the outbreak has put paid to a number of previously-agreed deals such as Xerox’s $35bn hostile bid for HP, Woodward and Hexcel’s $15bn merger and the deal to sell Victoria’s Secret to private equity group Sycamore Partners. Although the deal has not gone down
the plughole yet, LVMH/Tiffany: repricing the family jewels (Financial Times, Lex) implies that if anyone could renegotiate a price in the downward direction it would be LVMH chief Bernard Arnault. He is, after all, often referred to as “the wolf in cashmere” 😂. Mind you, walking away from the deal could cost him $575m in penalties and he’s still got enough money to continue to go through with it despite everything.
TikTok becomes political platform ahead of US election (Financial Times, Siddarth Venkataramakrishnan) is an interesting article as it highlights TikTok branching out from amusing antics videos to politics where young influencers try to win over their peers in creative ways. If the quality of banter on Twitter is anything to go by, I think this will be an area ripe for outside abuse. It’s early stages, however, so expect some interesting developments.
AstraZeneca doubles capacity for potential Covid-19 vaccine (The Guardian, Kalyeena Makortoff) heralds the latest developments at AstraZeneca which is upping the manufacturing capacity of its potential coronavirus vaccine, AZD1222, to 2bn doses after striking deals with a number of international organisations. The company admits that it is taking a big risk on a vaccine that hasn’t been proven yet, but if it did work vaccines could be distributed from September! If it turns out that it doesn’t work, then the company would offer its facilities to vaccine maker who use similar production methods. Wouldn’t it be great if this worked, eh!
…in other news…
There’s been a distinct lack of “amusing” stories to publish this week unfortunately 🥱, but here’s something that may improve your life instead 😊: Chef confirms where fruit and veg should be kept – and common banana mistake people make (The Mirror, Courtney Pochin https://tinyurl.com/y7u37o3m). Didn’t know that banana one – but it all makes sense!
Some of today’s market, commodity & currency moves (as at 0750hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *||Dow Jones *||S&P 500 *||Nasdaq*||DAX *||CAC-40 *||Nikkei **||Shanghai **|
|6,341 (-0.64%)||9,616||12,431 (-0.45%)||5,002 (-0.37%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)