Tuesday 07/04/20

  1. In MARKETS, OIL & CORONAVIRUS GEAR NEWS, markets rally but oil talks are delayed, UK testing hits a setback and the US orders 3M masks
  2. In TRANSPORT & LEISURE RELATED NEWS, EasyJet faces potential insolvency, Carnival gets a big Saudi investment, P&O looks vulnerable, car sales hit new lows, Airbnb gets a welcome cash injection and bookies see share prices rise
  3. In INDIVIDUAL COMPANY NEWS, Quibi decides to launch despite everything, Facebook moves to quash 5G conspiracy theories, WH Smith aims to raise money and Debenhams goes into administration – again
  4. In OTHER NEWS, I bring you some great cooking ideas…



So markets rally, oil talks get delayed, UK testing disappoints and the US orders more masks…

FTSE shrugs off dire UK data as markets sense easing of Covid-19 crisis (The Guardian, Rob Davies) highlights a bit of a respite for markets as investors seem to think that there’s light at the end of the tunnel following reports that some European countries were thinking of relaxing lockdown restrictions. FWIW, I think this rally is ephemeral and we will continue to see volatility on scrappy news for the foreseeable future. Talks delay puts dent in oil price recovery (The Times, Emily Gosden) shows that the shine was taken off the recent oil price rally as talks between OPEC (led by Saudi Arabia) and non-OPEC producers (led by Russia) were delayed until Thursday. One of the Russians said that a deal was close, but let’s be honest – that’s just negotiation 🐮💩 designed to put pressure on the other side to make them look bad if nothing happens. We will just have to wait and see whether they come out with the production cut that many are anticipating. Remember that last time everyone expected a cut, it didn’t happen and oil prices fell through the floor.

UK government admits Covid-19 antibody tests don’t work (Financial Times, Camilla Hodgson and George Parker) is

a real blow as the government admitted that the 17.5m antibody tests it ordered don’t work, meaning that mass-testing will be delayed. It is working with nine companies that have developed coronavirus antibody tests, but the assessors at Oxford University have found that results are unreliable. * SO WHAT? * The government had hoped to send out at-home antibody testing kits, but that won’t be possible now. Professor John Bell, Regius Professor of Medicine at Oxford University, said that the government will continue to work with old and new suppliers to develop something that is robust – which he says will take at least a month. The rollout of a full antibody testing regime has yet to be achieved by any government in the world – so it’s not just us! Meanwhile, demand for kits that detect current Covid-19 infection (aka PCR tests) continue to outstrip supply according to South Korea’s factories stretched to limit churning out virus tests (Financial Times, Song Jung-a, Edward White and June Yoon).

Following recent reports about the US apparently commandeering masks made by 3M that were destined for Germany, Trump administration orders 167 million face masks from 3M for coronavirus pandemic (Wall Street Journal, Alex Leary and Austen Hufford) highlights a big order from the government to cover the next three months. This seemingly draws a line under the spat between Trump and 3M where the former criticised the latter for not providing enough equipment for Americans on the front line.



EasyJet faces insolvency, Carnival welcomes an investor, P&O faces choppy waters, car sales plummet, Airbnb gets a lifeline and gambling firms benefit from lockdown…

In Founders fear involvency despite £600m government loan (The Guardian, Gwyn Topham) we see that EasyJet has managed to wangle a loan from the Treasury and Bank of England’s emergency coronavirus fund. It said it would also borrow a further $500m from commercial creditors. Founder Sir Stelios Haji-Ioannou, who is the company’s biggest shareholder with his family, is pushing for the sacking of two directors and the cancellation of its £4.5bn order for 107 “useless” planes from Airbus. * SO WHAT? * Given the likelihood of prolonged weak passenger numbers, you can understand Haji-Ioannu’s frustration – but you can also understand that Airbus won’t be taking this lightly either. He believes that the company will run out of cash by the end of the year, despite the new-found funds, because he believes that current projections of a return to international travel are “wildly optimistic”.

It’s Carnival time for Saudi Arabia (The Times, Robert Miller) shows that Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has managed to build up an 8.2% stake in Carnival in a move that reflects some confidence in the cruise industry. Current conditions in the industry are dire as all cruise operators have suspended operations until at least May. Carnival itself says that it is going through $1bn a month currently and last week managed to raise $6.3bn in debt and equity from investors to keep it going for a few months. * SO WHAT? * Well done to Carnival for raising money at such a difficult time. However, I think it will be a VERY slow recovery for the industry because they will surely have to offer MASSIVE discounts to tempt people to hop on board due to the hugely negative press that cruises have received since the pandemic broke out. Given the alternatives to cruising that will also no doubt be offering tempting discounts, I expect the whole industry to be going against the current for quite some time. I would presume that there will be even more consolidation in this sector as it hunkers down for the long haul.

P&O Ferries in trouble as owner seeks rescue deal (Daily Telegraph, Oliver Gill) highlights the fact that almost 4,000 jobs are now hanging in the balance as the ferry company faces a funding crisis. The operator’s Dubai owner, DP World, is trying to organise a £250m rescue deal that will include a chunk of money from the government. Chief exec

Janette Bell emphasised the urgency for a deal, which is still being negotiated. * SO WHAT? * This is a tough one, but given that P&O Ferries accounts for about 15% of goods being imported into the UK, and over half of the goods transported between Dover and Calais, you would have thought it would be within the government’s interest to come to some sort of deal. Whether it can get hold of the funds soon enough or not is another question.

Car sales plummet to worst decline for 20 years (The Times, Callum Jones) reflects an already bad situation getting even worse for the British automotive industry as the latest figures from the Society of Motor Manufacturers and Traders (SMMT) show that March sales had their worst monthly drop in over two decades – 44.4%. The SMMT is now predicting a 25% drop in annual new registrations. * SO WHAT? * This is obviously bad, but not unexpected. It’s also worse elsewhere as sales fell by 85% in Italy, by 72% in France and by 69% in Spain. The SMMT’s chief, Mike Hawes, is talking a good game, implying that this is a temporary thing but I would argue that car sales will be tricky for quite some time as many people will probably be more cautious with their money (especially with big ticket items) and the likelihood of the secondhand car market getting flooded.

Elsewhere, Airbnb raises $1billion from Silver Lake, Sixth Street Partners (Wall Street Journal, Kimberly Chin) shows some relief for the troubled home-sharing start-up as it has managed to raise some extra cash from private equity firms to help support its long term goals. It said that about $5m of the investment will go towards a Superhost relief fund that will provide grants to hosts. * SO WHAT? * Airbnb has continued to rack up big losses and has been considering various options, including an IPO, to raise more finance. If it goes ahead with this, I would have thought that the company will have to give itself a much more conservative valuation than the $31bn it had in February to stand a chance of attracting interest, especially given its “exposure” to coronavirus sentiment.

Bookie sees shares jump after virus losses halved (The Times, Callum Jones) highlights the fact that shares in GVC – which owns Ladbrokes, Coral and Foxy Bingo – shot up by almost 20% after it said that it was cutting its losses estimate and that more savings may be possible. * SO WHAT? * This is great news for a company that has also been hit by the sudden drop-off in sports betting as events continue to be cancelled around the world. However, its chief exec said that it is trying to be responsible with online gambling (interest in which is increasing as people get bored in lockdown) – something that the regulator will be pleased to hear. Having said that, I saw reports recently that said that the UK’s Gambling Commission, the industry regulator, is going to be cutting staff, so maybe there won’t be quite so much oversight as there might have been.



Quibi decides to launch, Facebook quashes 5G conspiracy theories, WH Smith aims to raise money and Debenhams goes into administration yet again…

In other interesting news today, Quibi launches $1.8bn bet on mobile video amid global lockdown (Financial Times, Tim Bradshaw) shows that the start-up which specialises in “quality” 10 minute videos decided to launch yesterday despite the fact that its success may be tempered by people have more time to spare at the moment. It is backed by companies such as Alibaba, Goldman Sachs and JP Morgan and is led by corporate heavyweights Jeffrey Katzenberg (founder of DreamWorks) and Meg Whitman (former CEO of HP). * SO WHAT? * The popularity of short-form content has been shooting up, as evidenced by the likes of YouTube and TikTok, and people are also willing to pay for online video in increasing numbers, as evidenced by the likes of Netflix. Quibi brings together both worlds and brings with it “movie-quality” scripted shows, reality TV and documentaries etc. It’ll be free to view for the first 90 days before starting to charge a subscription of up to £7.99 per month. FWIW, I think this is pretty exciting and although its format may not be quite right for many time-rich people on lockdown right now, it gives people the opportunity to have a proper look and get hooked on all the original shows.

Facebook moves to cut 5G conspiracy theories (Daily Telegraph, James Cook) shows the social media giant fighting back against false news that 5G is responsible for the spread of the coronavirus. The theory is said to have originated in broadcasts from Russian media, in English, aimed at Western audiences and has resulted in people going around and burning down 5G masts. The spread of this theory now means that a “Stop 5G U.K” group now has 56,000 members and 2,400 new posts every day. So far,

Facebook has refused to delete these groups but it has now started to take down posts which link 5G to the spread of the coronavirus. Anyone now sharing such a post will be given a warning. * SO WHAT? * This is clearly a serious problem that comes at a time when communication is absolutely key. Facebook has been characteristically slow at responding and it remains to be seen whether its fact checkers can keep up with all the cr*p that people post. If they can shut down the celebs who spread this stuff, that would be a start!

Meanwhile, on the UK high street, WH Smith looks to raise £150m as pressure rises (The Times, Louisa Clarence-Smith) shows that the high street stalwart is taking pre-emptive action as it is trying to bolster its balance sheet following the closure of most of its stores in March. Shares in the retailer have fallen by a whopping 41% over the last month. * SO WHAT? * WH Smith has been a rare retail success story in recent times as it has benefited hugely from expanding its presence in railway stations and airports. This has helped to support its stodgy high street business but clearly this has all gone pear-shaped since no-one is allowed to travel any more! The financing sounds like a good move and I would expect the company to be one of the first to see business pick up markedly when the effects of coronavirus are brought more under control due to the recommencement of commuting and travel.

And finally, if you haven’t seen it already, Debenhams files for administration (Financial Times, Jonathan Eley) shows that the troubled department store operator has entered into its third insolvency process in under a year! The business is trying to avoid liquidation whilst still trading online. * SO WHAT? * Debenhams has been a complete nightmare for quite some time. It’s good to see that the management has some fight but let’s be honest – are customers going to flock to a store that specialises in nothing and sells product that you can source anywhere else (and probably cheaper)? I think not. If it does fail, it will leave huge holes in high streets up and down the country and a headache for local councils who will be left with the problem of how to replace the heart of their retail centres.



And finally, in other news…

I thought I’d leave you with a few fun lockdown ideas in Man spends 18 months perfecting his own KFC recipe – and reckons he’s nailed it (The Mirror, Paige Holland https://tinyurl.com/qlle4bt) and then maybe you can follow that up with Creative baker shares easy recipe to make giant Jaffa Cake (The Mirror, Luke Matthews https://tinyurl.com/sarksrz). Nice 👍

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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 **
5,582 (+3.08%)7,91310,075 (+5.77%)4,345 (+4.58%)18,950 (+2.01%)2,821 (+2.05%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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