Tuesday 03/03/20

  1. In MARKETS, MACRO & OIL NEWS, markets recover, the UK’s digital services tax could be ditched, weaker oil prices could hit Putin
  2. In CORONAVIRUS NEWS, the OECD warns on global growth, airlines face continued turbulence and Finablr counts the cost
  3. In INDIVIDUAL COMPANY NEWS, Gilead buys Forty Seven and Waymo raises outside cash
  4. In OTHER NEWS, I bring you an interesting piece of furniture for the committed…



So markets recover on hope, the proposed UK services tax could be used in bargaining and weaker oil prices make Putin’s spending plans trickier…

Record rise in shares on rate hopes (The Times, Philip Aldrick) shows that the major US stock markets all had big rises on hopes that governments around the world will unleash big stimulus packages to counter the damage caused by the coronavirus outbreak. G7 finance ministers and central bank governors are due to hold a conference call today to talk about a co-ordinated response. It will be led by Steven Mnuchin, the US Treasury Secretary, and Jerome Powell, head of the Federal Reserve. The International Monetary Fund and World Bank added that they will be doing everything they can to help the situation. * SO WHAT? * It’s good that they are all doing this, but we are still in an ongoing situation. Still, it’s better than NOT doing anything!

UK considers retreat over US technology giant tax (Daily Telegraph, Tom Rees) says that the UK could potentially back down over a proposed digital tax on tech giants in order to boost chances of a free trade deal with the US. The 2% tax on revenues was expected to take effect in April as part of a push to raise tax take from tech giants who have, until now, been shuffling profits around the world to

minimise their tax payments. Former chancellor Sajid Javid locked horns with US Treasury secretary Steven Mnuchin at Davos in January over the imposition of a tax which, from the American point of view, would “unfairly” target American companies. At the time, Javid said that the UK would press on alone despite the OECD looking at a broader approach and France caving in to US demands. * SO WHAT? * The digital services tax was clearly a negotiation ploy and now Javid has gone, the government has the perfect excuse for reaching a trade agreement with the Americans. Whether such a deal will make up for the potential trade we will lose with Europe, however, is a moot point.

In Falling oil prices threaten to derail Putin’s spending promises (Financial Times, Max Seddon) we see that Russian  president Vladimir Putin’s recent spending promises are looking increasingly vulnerable to falling oil prices. Brent crude is now hovering around $50 a barrel versus Russia’s break-even price of $42, so his main source of cash isn’t looking too healthy. * SO WHAT? * Putin made promises in January to allocate $60bn to infrastructure and social spending as part of a major overhaul that could yet allow him to remain in power despite his falling approval ratings. He needed to raid the national wealth fund to finance about 25% of his plans, but oil price weakness will restrict cash inflows and weaken the rouble, making it harder for Russia to build up more reserves. The finance ministry is talking a good game, but things will definitely be tight.



The OECD warns on global growth, airlines face further turbulence and Finablr counts the cost…

OECD warns coronavirus could halve global growth (Financial Times, Chris Giles, Martin Arnold and Brendan Greely) just highlights what pretty much everyone already knows – that the coronavirus going to affect global economic growth prospects. This forecast predicts a global recession, prompting action from central banks and governments around the world to co-ordinate their efforts to limit the damage.

Airline industry braced for major threat from virus turmoil (The Guardian, Gwyn Topham) outlines the current state of play in the industry as British Airways and Ryanair announced more flight cuts yesterday. Airlines face tough “use it or lose it” rules on airport take-off and landing slots which mean if they don’t use their allocation at least 80% of the time, they lose them – so their trade body, the International Air Transport Association (IATA) is trying to get these rules suspended. Given the huge loss in passenger numbers, airlines are now trying to encourage staff to take leave. * SO WHAT? * Things are getting pretty serious for the airlines and their share prices have been

decimated – especially over the last week or so. It took the industry five years to get back to profitability following the terror attacks in 2001, but IATA is hoping that the repercussions of the coronavirus won’t be quite so bad. Given all the panic going on at the moment, the risk is most definitely on the upside because no-one is expecting any! If warmer spring weather helps to reduce the virus’ prevalence, bookings could potentially shoot through the roof in a kind of holiday relief rally…

Finablr warns coronavirus and cyber attacks to squeeze profits (Financial Times, Nicholas Megaw) shows that the London-listed payments company has warned that its profits will be dented by the double-whammy of the coronavirus (fewer transactions overall) and a New Year’s Eve cyber attack (criminals blocked its systems and demanded money for tools to unblock them). This affected Finablr’s Travelex forex business at the beginning of this year and left the company without access to all of its financial reporting tools for some of January, meaning that its full-year results for 2019 won’t be out until mid-April. * SO WHAT? * The Abu Dhabi-based company listed on the London stock exchange in May 2018, since which time the share price has fallen by over 60% 😱. Its troubles have been magnified by association with its founder, Indian billionaire BR Shetty, who also founded NMC Health, which is under investigation by UK regulators regarding its ownership structure and finances.



Gilead buys cancer therapy specialist for $4.9bn and Waymo gets outside funding…

Gilead buys cancer therapy specialist Forty Seven in $4.9bn deal (Financial Times, Ortenca Aliaj and Eric Platt) heralds the latest deal in the drugs sector as Gilead has agreed to buy Forty Seven for $4.9bn in cash giving it access, among other things, to Forty Seven’s magrolimab – which helps the body’s own immune system to fight a number of different cancers including leukaemia. The price represents an eye-watering 96% premium to Forty Seven’s closing share price before news of talks were leaked last Thursday. * SO WHAT? * Biotech and pharmaceuticals

companies are doing a lot of deals these days to boost their cancer treatment capabilities – Bristol Myers-Squibb bought Celgene for $93bn last January, Pfizer bought Array BioPharma for $11bn in June while rivals Eli Lilly and GlaxoSmithKline have also invested in this area over the last 18 months.

Waymo raises $2.25billion after courting outside investors for first time (Wall Street Journal, Tim Higgins) highlights a landmark in the history of Alphabet’s driverless car venture as it adds outside expertise to Waymo’s board. The new investment will go towards deploying Waymo’s fifth-generation suite of sensors and its goods delivery service, Waymo Via. * SO WHAT? * This is a decent slug of money and I think it’s a good thing for the company to get some outside help. Still, I remain sceptical about the short-term viability of driverless. That said, Waymo is at the cutting edge.



And finally, in other news…

If you’re a gamer, you are going to love this, but if you aren’t, you are going to wonder what the world is coming to in Japan goes beyond gaming desks with the gaming bed (SoraNews24, Casey Baseel https://tinyurl.com/vpays3s). I think that there is a reason that this is a single bed and not a double…

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Some of today’s market, commodity & currency moves (as at 0828hrs 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 **
6,655 (+1.13%)(error)(error)8,95211,858 (-0.27%)5,343 (+0.62%)21,083 (-1.22%)2,993 (+0.74%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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