- In MACROECONOMIC NEWS, a historic Asian trade deal is signed, Japan’s economy rebounds and BoJo self-isolates
- In CORONATRENDS NEWS, Simon Property and Taubman agree on a lower price, the Supreme Court readies itself for an insurance battle and Johnson & Johnson launches a UK trial
- In CONSUMER & UK HIGH STREET NEWS, US consumers pay down debt, Arcadia wobbles, Mitchells & Butlers cuts venues, the Post Office distances itself from Royal Mail and Nando’s rescues Wahaca
- AND FINALLY, I bring you an idea for super-quick roasties and a blue dog…
So Asia strengthens trading ties, Japan’s economy grows and BoJo has to self-isolate…
China and 14 Asia-Pacific countries agree historic deal (The Guardian, Jasper Jolly) shows that one of the biggest free trade deals in history was signed over the weekend. The Regional Comprehensive Economic Partnership (RCEP) was signed yesterday via video link after eight years of negotiation and covers China, Japan, South Korea, Australia, New Zealand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – who are collectively responsible for 30% of the world’s GDP. The deal outlines terms of trade, cross-border investment and new rules for e-commerce and intellectual property. India is a notable absentee from the agreement as it pulled out last year, saying that it thought that the agreement would not provide adequate protection from its domestic industry and agriculture but it will still be possible for other countries to sign up. Huge Asian trade pact increases Beijing’s influence (Daily Telegraph) reflects opinion that the agreement favours Chinese interests and could help it to draft the rules of trade in the region and Huge Asia-Pacific trade agreement is challenge for Biden (The Times, James Hurley, Richard Lloyd Parry, Bernard Lagan) suggests that it may make things a bit harder for the Americans, who pulled out of their own trade deal with the region (the Trans Pacific Partnership) a few years back under Trump. * SO WHAT? * This deal cuts out 90% of tariffs but it does not include anything on environmental protections or labour rights. It is, however, a good start to getting some coherence in the region.
Meanwhile, Japan’s economy rebounds 5% in the third quarter (Financial Times, Robin Harding) highlights Q3 GDP growth that came in above market expectations. Taking everything into account, Japan’s economy grew by 21.4% on an annualised basis, which is in the ballpark of other advanced economies as they bounced back strongly from the lows of the outbreak. Yoshihide Suga, Japan’s PM, is about to unveil a new spending package that could be worth around $95.5bn. * SO WHAT? * Japan’s economy was already struggling before the coronavirus as a hike in consumption tax last autumn tipped it into recession. Any hopes of an Olympic-fuelled boost were clearly snuffed out by the outbreak, but who knows – maybe a combination of stimulus, a desire for people to travel and a renewed opportunity to see live sports at a postponed Olympics could give the economy a decent boost in 2021…
Then in Blow to Johnson plans for reboot as PM forced to self-isolate (Financial Times, George Parker, Sebastian Payne and Sarah Neville) we see that Boris’s plans for a “re-set”, after some high-profile departures over the last few days, have had a set-back as he has been told by NHS Test and Trace to self-isolate after meeting a Conservative MP who later developed symptoms of Covid-19. He does not have any symptoms at the moment and will continue to work from Downing Street.
Simon Property and Taubman renegotiate, the insurance battle goes to the Supreme Court and Johnson & Johnson launches a UK trial…
Simon Property, Taubman agree to revise merger deal (Wall Street Journal, Cara Lombardo) shows that high-end mall developer Taubman has agreed to accept a lower takeover price from Simon Property ($43 a share versus the original $52.50) in order to avoid a costly legal battle. The deal was first announced in February just before the pandemic really started to kick in and its original structure will be unchanged. The deal is expected to close either later this year or the beginning of next. * SO WHAT? * This has shades of LVMH/Tiffany about it as both sides got together to come to a compromise in that case too. You only want to bring the lawyers in if you absolutely, positively have to 😜
Talking of court cases, Supreme court case looms as insurers battle firms over Covid cover (The Guardian, Julia Kollewe) reminds us that the latest stage of the test case brought by the Financial Conduct Authority on behalf of business owners who had business interruption insurance will be heard over the next four days. According to the Association of British Insurers, about £900m-worth of claims is at stake. The FCA won the last round against the insurers, but the insurers refused to pay out and appealed the decision, which brings us here. Timing of any ruling is currently unknown.
Then, in the week after Pfizer announces its vaccine news, J&J to launch UK trial of its Covid-19 vaccine (Financial Times, Donato Paolo Mancini) shows that US pharmaceutical giant Johnson & Johnson is to launch its UK Phase 3 trial this week via its Janssen subsidiary. It will be the third experimental vaccine to go into late-stage trials in the UK after one developed by Novavax and the other one being developed by AstraZeneca and Oxford University. According to government forecasts, if the J&J trials go well, 30m doses could be ready for use here by mid-next year.
CONSUMER & UK HIGH STREET NEWS
US consumers pay down debt and we take a look at the UK high street in tricky times…
Bank credit card profits in question as US consumers pay down debt (Financial Times, Robert Armstrong) shows that American consumers are paying down their credit cards as a lack of opportunity to spend elsewhere affects consumer behaviour. According to stats from the Federal Reserve, there were $755bn-worth of card loans held by US banks as at the last week of October. This was $100bn lower than at the start of the pandemic and it is continuing to trend lower in the last three out of four weeks. TransUnion stats also showed that the number of new card accounts fell by 50% in Q3 versus the same time last year – and all of this combined will hit banks as high interest cards are a key profit driver. * SO WHAT? * On the one hand, it’s good that households are paying down debt, but if they don’t spend on anything other than essentials this will be bad for the economy in the long run. It could also be a double-whammy for banks as they could end up getting hit by more loans going bad AND a lack of profit from their lucrative cards business.
Back in the UK, Arcadia in talks over possible £30m loan after Covid sales loss (The Guardian, Jasper Jolly) shows that the Arcadia fashion group – which owns brands including Topshop, Burton and Dorothy Perkins – is currently in talks with lenders about loans in order to help out with the damage done from lost sales under lockdown. Arcadia currently operates about 500 sites in the UK employing about 15,000 staff. All of the staff in England have been furloughed. * SO WHAT? * Arcadia was already having problems before the coronavirus and the outbreak has just compounded them. As things stand, Arcadia could be put into administration to protect company assets while
directors try to sell individual brands but this is still risky at the current time. The company denies that it is even considering administration at this point. For now I guess they just have to cross their fingers and hope for online sales success!
The gloom continues in All Bar One owner axes up to 20 venues as Covid bites (Daily Telegraph, Ben Woods and Hannah Uttley) as Mitchells & Butlers, owner of brands such as All Bar One and Harvester, has decided to cut up to 20 pubs and restaurants out of its estate of around 1,700 establishments – but it is currently unclear as to how many of its 44,000 staff will be affected by this decision. * SO WHAT? * Rivals including Marston’s, Fuller’s, Young’s and Greene King have all had to cut thousands of roles following the impact of the 10pm curfew and Lockdown 2.0. It is hardly surprising that M&B has had to do the same thing given what’s going on at the moment.
End for Post Office tie to Royal Mail (The Times, Robert Lea) shows that the historic link between the Royal Mail and the Post Office is about to end, resulting in the state-owned Post Office handling the packages of rivals such as Amazon. * SO WHAT? * Many believe that once this tie is broken, outlets could have a freer hand to do other activities like click-and-collect or pick-up/drop-off of parcels, which could be particularly useful in the run-up to Christmas. The two were formally separated ten years ago, but they signed an agreement at the time whereby the Post Office agreed to exclusively handle Royal Mail post, parcels and packages. This has now come to an end and future arrangements are currently being discussed. Clearly the Post Office is keen to free itself to work with rivals.
Then in Nando’s serves up rescue for Wahaca (The Times, Ben Martin), we see that the South African businessman behind Nando’s has just rescued Wahaca by buying a majority stake in Wahaca’s parent company, Oaxaca and given it a loan to help it through the pandemic. At least that’s one less restaurant chain biting the dust (for now, at least!).
…in other news…
I thought I’d leave you today with a tip on how to do speedy roast potatoes in Chef shares trick to make ‘perfectly crispy’ roast potatoes in just 20 minutes (The Mirror, Luke Matthews) and a hilarious and very cute dog in Freshly-groomed dog left ‘looking like Smurf’ after biting into ink cartridge (The Mirror, Luke Matthews). Nice!
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/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)