- In CORONAVIRUS & POLITICS NEWS, we see data problems, the effect on businesses, tourism and why this could benefit Trump. The UK replaces its Chancellor of the Exchequer
- In CAR NEWS, Tesla asks for more money just as it faces an investigation and Nissan has its first quarterly loss in a decade
- In INDIVIDUAL COMPANY NEWS, Microsoft’s Pentagon contract hits a hurdle, Deutsche Telekom tries to renegotiate terms of the Sprint deal and betting firms suffer another blow
- In OTHER NEWS, I bring you some potential lunch ideas…
CORONAVIRUS & POLITICAL NEWS
So the coronavirus brings up data questions, the impact on businesses including tourism and an unexpected boon for Trump while the UK switches its Chancellor…
Data experts battle to map path of coronavirus outbreak (Financial Times, Sarah Neville) highlights the difficulty of tracking the progress of the coronavirus as Wednesday saw a major spike in the number of reported cases, which spooked a lot of people. It came as a particular surprise because it came only a day after the World Health Organisation (WHO) had suggested that we might have hit the “peak” of infections and deaths. * SO WHAT? * The sudden increase in cases was due to the way China changed its reporting criteria. Associate professor at the University of Warwick, Mike Tildesley, said that cases had previously only been confirmed “only after positive laboratory tests” whereas Chinese authorities are now reporting confirmed cases “based on clinical diagnosis of symptoms”. People could have concluded that the disease had started to lose momentum because the labs were inundated, leading to a bottleneck and NOT a slowdown of the coronavirus. The outbreak continues…
Businesses worldwide count cost of outbreak (The Guardian, Jasper Jolly) does a really good job of rounding up the impact on a number of businesses so far. British digger maker JCB has decided to reduce working hours and suspend overtime due to a shortage of parts from China, 24 airlines so far have cancelled flights to and from China, Pernod Ricard will take a hit on profit growth as Chinese bars are closed or empty and Ralph Lauren says its sales will take a $55-70m dive as two-thirds of its Chinese mainland outlets have been closed for the last week. Geneva motor show organisers brace for disruption (The Guardian, Jasper Jolly and Julia Kollewe) highlights the fragility of another major trade show shortly after the cancellation of Barcelona’s Mobile World Congress and Alibaba warns of severe impact as coronavirus brings China to halt (Financial Times, Ryan McMorrow) shows how China’s bellwether is now expecting a tough outlook as sales of some big brands on its platform have fallen 40-80% versus January/February last year. Given that Alibaba’s platforms account for a massive two-thirds of everything bought online in China, you would have thought that it would be in a good position to benefit from people increasing their online shopping (e-commerce transactions
have apparently tripled over the last few weeks). However, merchants on the platform are getting low on inventory, the suppliers are patchy on the restart of production and there’s a lack of couriers to deliver the merchandise. Coronavirus hits global tourism industry as Chinese stay at home (Financial Times, Alice Hancock) says that the dramatic drop of Chinese tourist numbers will hit hoteliers, restaurants, tour operators and retailers as one of the top spending customer groups stays away. Countries in the Asian region who rely heavily on Chinese tourists (they account for 25% of tourists in Thailand, for example) are finding that their businesses and currencies are taking a major bashing and Macao has shut its casinos for at least two weeks. Big winner from coronavirus will be Donald Trump (Daily Telegraph, Garry White) has a very interesting angle as it suggests that the coronavirus will end up being a real boon for Trump in his re-election campaign. Basically, there was a lot of scepticism surrounding the ability of China to actually live up to the “phase one” trade agreement because it called for Chinese purchases of US farm goods to increase by around $16bn per year – something that was unlikely to happen because the decimation of China’s pig herd due to swine fever meant that demand for soya beans for feed fell off a cliff. The resulting failure of his much-touted negotiation victory would have been difficult to explain away on the campaign trail but now the coronavirus has hit Trump can say to the farmers that the reason why they aren’t seeing the shipments he promised is due to him protecting his citizens (not because of lack of China demand). He can also use this as an excuse to “de-globalise” and bring jobs and production back to the US as it has further exposed an over-reliance on China. This all means that the coronavirus has done what his trade negotiations would have failed to do – break the supply chains.
There was a dramatic development yesterday in British politics in Sajid Javid resigns as UK chancellor of the exchequer (Financial Times, Sebastian Payne and George Parker) as Boris Johnson’s cabinet reshuffle proved to be more dramatic than had been expected. It apparently happened because BoJo wanted Javid to sack his advisers and Javid refused. He’s been replaced by young up-and-comer Rishi Sunak, who you can find more about in Rishi Sunak, the fast-rising Brexiter rewarded by Johnson (Financial Times, Jim Pickard) but the main thing that everyone will be concerned about is the Budget, which was due to be unveiled on March 11th. There was initial market speculation that the new guy may be more generous than Javid, but obviously that is completely unfounded at the moment! There’s no word yet on whether the Budget will be delayed.
Tesla asks for more money and Nissan is the latest carmaker to announce big losses…
Tesla faces fresh inquiry as it launches surprise $2bn offering (Daily Telegraph, Olivia Rudgard) highlights yet another investigation into Tesla by the Securities and Exchange Commission, which has only just concluded the last investigation over Elon Musk’s tweets in 2018 saying that he planned to take the company private and his projections for Model 3 production rates in 2017. This time, it has issued a subpoena for “information concerning certain financial data and contracts including Tesla’s regular financing arrangements”. This came on the day that the company unleashed a surprise $2bn stock offering that took advantage of Tesla’s recent share price performance, the proceeds of which will be used to “further strengthen its balance sheet, as well as for general corporate
purposes”. Musk had said only two weeks ago that raising more capital “doesn’t make sense” for the company, yet here we are 😂. * SO WHAT? * OK so the investigation’s probably going to be a bit of a pain, but there were grumblings in the background about yet another refinancing hanging over the company. If you are going to do something like this, it’s always better to do it when you are on a winning streak – and Tesla’s share price has been doing particularly well in the last six weeks.
In Nissan suffers first loss in a decade (The Times, Robert Lea) we see that Nissan not only made its first quarterly loss since the financial crisis, but it made things worse by painting a very downbeat outlook for the year. It may even get worse still as the company said that the impact of the coronavirus was not included in its latest forecasts. China is the company’s biggest market. Ouch. * SO WHAT? * All the major carmakers are having a tough time on the sales front (Daimler announced a similarly poor performance earlier this week), but it seems that Nissan is suffering more than most – plus it’s still got this whole Carlos Ghosn thing going on.
INDIVIDUAL COMPANY NEWS
Microsoft gets a slap, Deutsche Telecom tries it on and betting firms take another blow…
Federal judge halts Pentagon cloud contract (Wall Street Journal, John McKinnon) heralds a major spanner in the works as a federal judge ordered a halt to work on the huge JEDI (Joint Enterprise Defence Infrastructure) cloud-computing contract awarded to Microsoft. * SO WHAT? * Amazon is contending that Microsoft’s award of the contract was due to improper influence from Donald Trump, but whatever happens ultimately, this will definitely slow things down. Amazon’s cloud unit, AWS, had long been considered the frontrunner for the project. This sounds like it could drag on for quite some time, but when you consider that the contract is thought to be worth about $10bn over the next ten years, you can see why.
Following the court’s recent decision to give the go-ahead to the T-Mobile/Sprint takeover, Deutsche Telekom seeks changes to Sprint takeover terms (Financial Times, James Fontanella-Khan, Nic Fildes and Miles Kruppa) shows that
T-Mobile’s parent company, Deutsche Telekom is going to try it on and attempt to negotiate the price down because the share price and performance of its target has fallen since the original terms were offered. * SO WHAT? * You can’t blame it for trying, but it’ll only work if Deutsche Telekom is willing to walk away from the deal. In theory, this is possible because the delay was so long (over two years), that it formally expired towards the end of last year.
As UK betting firms continue to lick their wounds from the regulatory assault on FOBTs (Fixed Odds Betting Terminals), Shares in betting firms plunge over suggested £2 cap in online casinos (The Guardian, Rob Davies) shows that the Gambling Commission, the industry’s regulator, is considering the implementation of a ceiling on the stakes for online casino games. Separately, the government has said in the recent past that it will be reviewing the 2005 Gambling Act due to growing concerns about gambling addiction and misconduct within the industry. * SO WHAT? * This sounds like an absolute nightmare for the likes of William Hill, GVC (owner of Ladbrokes), Playtech (which makes gambling software), Flutter and 888. It just confirms the need for ongoing efforts to expand in other markets as their domestic one is coming under sustained attack.
And finally, in other news…
I thought I’d give you some inspiration for lunchtime with 42 more foods you need to eat before you die (Insider, Giulia Hjort https://tinyurl.com/wjf4cyr). TBH, many of them look like they could, in fact, be the last thing you actually eat before you die! If you wondered what inspired that list, then have a look at 42 foods you need to eat before you die (Insider, Lisa Nho and Laura Bilash https://tinyurl.com/wxmwbhs). Amazing, but your arteries may fur up just watching this…
Some of today’s market, commodity & currency moves (as at 0710hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *
|Dow Jones *
|S&P 500 *
|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)