Thursday 09/04/20

  1. In MACRO, MARKETS & COMMODITIES NEWS, EU talks fail as lockdowns relax, the UK regulator eases fundraising rules, Wall Street analysts warn against over-exuberance and uranium prices go nuclear
  2. In CORONVIRUS “WINNERS” & LOSERS, Disney+ racks up the subscribers, esports tries to fill the gap and food retailers benefit while lawyer, accountant and investment banker jobs are affected, manufacturing jobs at Airbus and Tesla are hit and others call for help
  3. In INDIVIDUAL COMPANY NEWS, Zoom gets slapped with a lawsuit for allegedly hiding security flaws
  4. AND FINALLY, I bring you toilet roll cakes and a brilliant restaurant…



So EU talks flop, the FCA eases fundraising rules, investors are warned against over-exuberance and uranium prices rise sharply…

EU fails to agree deal on €540bn coronavirus rescue plan (The Guardian, Jennifer Rankin) highlights the ongoing divisions between the more prosperous northern Europe and the more indebted southern Europe as 19 finance ministers emerged from a marathon conference call with nothing to show for it. France and Germany appealed for agreement and Spain warned that the EU’s future was at risk. The main sticking point was the strings attached to credit issued by the eurozone bailout fund. Interestingly, France made a veiled threat that they might go off with a smaller group of Eurozone countries to sort out their own debt issuance (and by that, I would have thought that it means forming a break-off group of stronger countries). * SO WHAT? * It’s anyone’s guess as to whether further talks will reach any deal – but if they don’t, I think that the future of the eurozone will look more uncertain as the north/south divide widens. If Europe ever needed unity, now is the time. While the north feels that it is not getting enough credit for the concessions it has made, you can understand why an already-struggling south won’t want to sign up to punitive, painful and long-lasting conditions.

Europe watches as countries slowly emerge from lockdown (Financial Times, James Shotter and Sam Jones) highlights the fact that all eyes will be on Austria, the Czech Republic and Denmark who are to become the first European countries to relax lockdown restrictions in the next few weeks. Kindergardens and schools in Denmark will reopen from April 15th, some shops selling non-essential goods in the Czech Republic will be allowed to reopen from Thursday and small shops, DIY stores and garden centres will be allowed to open in Austria from April 14th. * SO WHAT? * All three of these countries have benefited from being of relatively small size and the speed with which they reacted initially in terms of lockdown. The decision to relax has not, however, been met with universal praise as parents and teachers are among those to object.

Let’s hope that they are all OK and don’t experience a second wave. The world will be watching.

Meanwhile, there’s good news for companies wanting to raise finance in FCA makes emergency fundraisings easier for UK-listed companies (Financial Times, Matthew Vincent) as the UK’s financial regulator announced a series of measures yesterday to accelerate fundraisings whilst simultaneously protecting investors. Measures include greater used of simplified prospectuses, relaxing disclosure rules within them and allowing investors to participate in share issuance without having to call a shareholder meeting.* SO WHAT? * This will take some of the pressure off the government and the banks and gives companies more options to finance their way through the crisis.

Wall St urges caution as bullish investors rush into recovery bets (Financial Times, Philip Georgiadis and Robin Wigglesworth) highlights strategist concerns that investors are jumping the gun as they pile into so-called “recovery” stocks. Pessimists are saying that the recent bounce shows that the market is pricing in recovery when major risks still remain but optimists are saying that current conditions present huge buying opportunities. Time will tell, but I think you have to have massive 🏀⚽🥎 to invest right now.

In Uranium enters bull market after Covid-19 hits supply (Financial Times, Neil Hume) we see that the price of the radioactive material used in nuclear power stations is now in bull market territory (up 20% from a low in March) as Kazakh miner Kazatomprom announced a major slash in production equivalent to 8% of the world’s supply. This is the latest blow to the world’s uranium supply as 30-35% of global uranium production has now been affected by coronavirus-related shutdowns. * SO WHAT? * Prices have been relatively weak due to stockpiling following the 2011 Fukushima disaster as nuclear power plants were shut down around the world (and plans for new ones were scrapped), but disruptions to supply have turned prices around. It doesn’t look like they will run out of steam any time soon either as more buyers are likely to appear this year because many contracts for nuclear fuel are going to be dropping away from 2021, meaning that buyers will be looking in the market NOW. 



“Winners” and losers continue to emerge…

OK. Deep breath. There’s a lot to get through in this section today 😅! Here goes!

Companies that are entertaining us through the current lockdown are going from strength to strength. Disney+ tops 50 million paid subscribers globally (Wall Street Journal, Maria Armental) highlights impressive subscriber numbers five months after the launch of the new streamer. It had 28.6m subscribers in early February, but that has since been boosted by rollout in India and Europe. The company originally said that it was hoping to have 60-90m subscribers by the end of fiscal 2024! It’s clearly well on the way to that target but the key will be how many new subscribers they will keep when the lockdowns peter out and cash-strapped consumers cut down on non-essentials. Esports filling the gap to keep regular fans interested (Daily Telegraph, Michael Cogley) shows that people are getting their sporting fix digitally with companies like Twitch seeing a massive rise in viewers during April. They are hosting more traditional sporting events in the virtual world in addition to popular games such as League of Legends, Call of Duty: Modern Warfare, Forntite and Grand Theft Auto V. Virtual football and motor racing are attracting more views – and I think that the coronavirus outbreak will accelerate esports’ development as people get used to it.

In retail, Japan convenience stores: lockdown lifeline (Financial Times, Lex) shows that Japan’s 60,000 convenience stores (the biggest players being Seven-Eleven, Lawson and FamilyMart) are benefiting from being classed as “essential” businesses and being very local after years of steady decline. Sales have been rising and footfall has increased for the first time in five months but it is unclear whether these gains will last more than a few quarters. Tesco pays dividend as it takes taxpayer cash (The Times, Ashley Armstrong) highlights controversy courted by Tesco as it has decided to pay investors £900m in dividends despite getting £585m from the taxpayer via business rates holiday due to the coronavirus. * SO WHAT? * This is very controversial and is a bit of a PR disaster as the company has decided to prioritise its shareholders – courting criticism that the government gave rates relief to those (like Tesco) who just don’t need it. If you include the cash injection it is due from selling off its Asian business AND the fact that its sales continue to go bananas, Tesco is doing VERY nicely. Maybe supermarkets should enjoy the rates holiday while they can as this is certainly one loophole that could be closed as funds get scarcer.

In terms of jobs, Lawyers and accountants’ income cut (The Times, Louisa Clarence-Smith) cites cuts in partner

payouts and salary at places like Linklaters, Freshfields Bruckhaus Deringer, KPMG and BDO with staff bonuses and pay increases also on the line, RBS cuts 130 jobs in investment bank (Financial Times, Nicholas Megaw) shows that the state-backed bank is continuing with its restructuring of NatWest Markets and Recruiters feel chill of freeze on hiring (The Times, Louisa Clarence-Smith) shows that big recruiters including Page Group and Robert Walters are shedding staff while Hays and Sthree are also tightening their belts. Lots of remaining staff are taking paycuts and reducing hours at the very least.

In manufacturing, Coronavirus pandemic hits plane makers, complicates 737 MAX return (Wall Street Journal, Doug Cameron) shows that the world’s biggest plane makers are having a nightmare. Airbus is cutting production of planes by a third and Boeing’s plans for returning its troubled 737 MAX to service are “up in the air” (sorry, I couldn’t help myself). * SO WHAT? * Once the dust settles on the coronavirus outbreak, it will be interesting to see how governments manage to help certain industries enough to survive without appearing to others to be giving them an unfair advantage. Trump has already whinged about this in his defence of Boeing through the 737 MAX scandal.

Tesla cuts salaries, furloughs workers under coronavirus shutdown (Wall Street Journal, Tim Higgins) highlights tough times for Tesla following enforced factory shutdowns. Despite all this, Musk is hoping to resume production in his Californian factory on May 4th – the day after the local government-enforced shutdown order is due to be lifted. * SO WHAT? * Tesla is not the only car manufacturer to suffer. EVERYONE else has had to furlough, sack and cut staff wages. I guess the thing with Tesla is that its finances have always looked pretty precarious as they only managed to become profitable relatively recently after YEARS of losses. You do wonder how successful future money-raisings will be (and I guarantee that there will be!) as investors will be pulled in all directions from other (and more profitable) companies wanting their cash.

Meanwhile, UK’s surveyors make plea for stamp duty holiday after lockdown (The Guardian, Patrick Collinson) highlights ongoing panic regarding the near-terms prospects for the housing market and a way to potentially help boost sales (i.e. “cancel” stamp duty for a period of time) and Dairy farmers seek government help as lockdown forces milk dumping (Financial Times, Judith Evans) reflects dairy farmers’ despair as the closure of restaurants, cafes and canteens has caused a collapse in the milk market. The Royal Association of British Dairy Farmers is asking for the government to compensate dairy farmers who are having to sell their milk a much lower rates or just pour it away. They will have to get in line as requests from all sorts of industries for government help will continue to come in from all sides.



Zoom gets slapped…

Following increasing revelations of Zoom’s security shortfalls, Investor sues Zoom after it is accused of hiding security flaws (Daily Telegraph, Hasan Chowdhury) shows that the recently-successful videoconferencing company is now facing a class-action lawsuit alleging that the company hid security flaws that allow hackers access to

video streams. * SO WHAT? * This will be a blow to the company as it has recently seen a massive spike in users (200m daily active users in March, according to the chief exec last week) as many people are forced to work from home. Although they may see a proportion of the gains they’ve made disappear when people go back to work, they should benefit longer term as videoconferencing will surely be seen as being more mainstream. Still, I expect Microsoft to be the main beneficiary as Teams is already part of Microsoft 365, doesn’t cost any extra and hasn’t had any security problems as yet.



And finally, in other news…

It’s always good to see some companies doing given the current circumstances – and Novelty toilet roll cakes keep Finnish baker in business (Reuters, fits right into that category! The great thing is that the deluge of orders has meant the bakery has been able to employ two more staff to keep up with demand! However, perhaps my new favourite video of all time is the one in this story: Parents find brilliant way to take heartbroken kids to a ‘restaurant’ in lockdown (The Mirror, Paige Holland That story didn’t make me cry, honest. There must have been something in my eye. Or maybe I’m developing hayfever…what great parents!

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Some of today’s market, commodity & currency moves (as at 0736hrs 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 **
5,678 (-0.47%)8,09110,333 (-0.23%)4,418 (-0.18%)19,346 (-0.04%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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