Tuesday 25/02/20

1. In CORONAVIRUS & MACRO NEWS, global markets fall on coronavirus fears, South Korea, Iran and Italy all suffer – as do airlines, carmakers and drugmakers but a vaccine may be in sight. Meanwhile, Trump visits India…
2. In FINANCIALS NEWS, a US hedge fund pushes for a Prudential break-up, Barclays’ CEO sets a departure date and Revolut raises $500m
3. In INDIVIDUAL COMPANY NEWS, Cargill aims for meatless, Primark falters and Tesco tries cashless
4. In OTHER NEWS, I bring you an example of Rubikscubism…

So markets, countries and industries continue to suffer from the coronavirus but a vaccine could be on the way. Meanwhile Trump visits India…

Contagion hits markets in $1trillion rout (Daily Telegraph, Louis Ashworth and Alan Tovey) highlights a tough day for global stock markets as investors feared a coronavirus-led economic slowdown. European shares had the biggest drop since the Brexit vote, the FTSE100 had its worst fall in 4.5 years, the Dow Jones had its worst one-day performance since early 2018 and oil prices fell by around 5%. Conversely, gold shot up to its highest level in seven years as investors flocked to safety.

South Korea places more than 7,000 soldiers in quarantine (Financial Times, Song Jung-a) displays dramatic attempts to stop the spread of the virus as the country became the worst affected outside China. The Bank of Korea looks likely to cut interest rates from the current level of 1.25% this Thursday to support the economy. Iran faces further isolation after jump in coronavirus deaths (Financial Times, Najmeh Bozorgmehr) highlights developments in Iran (it now has the highest number of coronavirus-related fatalities outside China) and that neighbouring countries including Turkey, Iraq, Afghanistan, Armenia and Pakistan are closing/restricting their borders. Coronavirus deals fresh blow to Italy’s struggling economy (Financial Times, Miles Johnson and Valentina Romei) looks at how the outbreak is hitting Italy’s already-fragile economy as contraction in GDP growth at the end of last year looks highly likely to continue in the first quarter of this year, potentially pushing Italy into recession. Major travel restrictions are in place and the disruption to manufacturing, supply chains and tourism will add up.

On a “per industry” basis, Airline stocks plunge as coronavirus hits Italy (Financial Times, Alice Hancock) shows that airlines such as EasyJet and Ryanair saw their share prices crater, as did major European hotelier Accor on fears of reduced travel on a global basis. Coronavirus: Chinese carmakers struggle with disruption (Financial Times, Christian Shepherd) says that although car factories are resuming operations following a nationwide

shutdown, it’ll take months to get back to normal. China’s automotive industry association had predicted that sales would stabilise this year, but now it is saying that sales will fall by 10% in the first half of this year but recover to falling 5% for the full year. Coronavirus outbreak causes supply problem for India’s drugmakers (Financial Times, Stephanie Findlay and Sun Yu) highlights the problems being caused by Chinese raw materials shortages as well as panic buying of antibiotics pushing prices sky high. India is one of the world’s biggest drug exporters and relies on China for a whopping 70% of its raw pharmaceutical ingredients. A February 16th report from the Confederation of Indian Industry (CII) said that Indian pharmaceutical companies are “running close to exhausting their supply of raw material”.

In a bit of potentially positive news amidst all this, Drugmaker Moderna delivers first experimental Coronavirus vaccine for human testing (Wall Street Journal, Peter Loftus) shows that the drugmaker has just sent the first batch of its coronavirus vaccine to US government researchers who are expected to commence a clinical trial on 20-25 healthy human volunteers by the end of April with initial results expected to be available in July or August. * SO WHAT? * Although a treatment can’t come quickly enough, this represents an incredibly rapid turnaround (this might even be a record). If all goes according to plan, it will only take three months to get to human testing versus a treatment for SARS taking 20 months to reach the same stage. Advantages in technology and public-private sector partnerships are helping to shorten the timelines when outbreaks occur. Clearly there are no guarantees here, but at least it seems that we are moving in the right direction. Although the vaccine is unlikely to be ready this time around, it may prevent a repeat of such an outbreak this time next year.

In non-coronavirus news, Trump presses Modi to bolster US ties amid trade frictions (Financial Times, Benjamin Parkin and Amy Kazmin) highlights Trump’s visit to India. Trump wants India to strengthen its ties with America, arguably to counterbalance China’s unpredictability, but there are many niggles between the two sides on trade. * SO WHAT? * As well as potentially diversifying reliance away from China, Trump may well be courting Indian relations in order to boost his vote back home in the presidential election as the affluent Indian-American community, who are thought to number about 4 million, have the tendency to vote Democrat.

Prudential faces pressure to break up, Barclays’ Staley sets a leaving date and Revolut raises a ton of cash…

US hedge fund calls for Prudential breakup as it takes near-$2bn stake (The Guardian, Joanna Partridge) highlights a rather vocal US hedge fund called Third Point calling for Prudential to split its Asian and US businesses. The activist investor has built up a stake of almost 5% in the London-based insurer and is using this as a platform to argue that Prudential Corporation Asia and Jackson National Life need to separate to maximise the value of both businesses. * SO WHAT? * Prudential only just separated out its fund management and European divisions into the London-traded M&G, but Third Point thinks it needs to go even further. The activist hedge fund is well known for building up stakes in big international companies and then calling for changes in strategy. There was no comment from Prudential.

Elsewhere, Barclays chief executive Staley ‘set to depart

by end of next year’ (Daily Telegraph, Michael O’Dwyer) heralds the latest development in the controversy surrounding Jes Staley as questions continue to dog the chief exec around his links to the notorious Jeffrey Epstein. * SO WHAT? * He has apparently told colleagues that he expects to leave by the end of next year, possibly at the bank’s annual meeting in May 2021. However, I think that he needs to go ASAP. His lingering will be bad for morale and questions are bound to continue about the judgement of the boss of a major bank who didn’t see anything wrong with visiting Epstein, a friend of 15 years, while he was under house arrest for soliciting prostitution from a minor. IMO Barclays needs to get rid and get another experienced operator on board asap. Markets are tricky, so the last thing you need is a zombie for a boss.

In Revolut valued at $5.5bn in long-awaited funding round (Financial Times, Nicholas Megaw) we see the upstart bank has managed to raise $500m in a much-anticipated funding round making it one of the most valuable fintechs in Europe. Revolut is continuing to roll out banking operations in Europe and broaden its product range in order to persuade people to use it as their main bank account (average deposit sizes for the second half of last year were between £350 to £260 per customer).

Cargill turns its sights on meatless, Primark falters and Tesco tries cashless…

Cargill gets teeth into non-meat production (The Times, James Dean) highlights moves by the world’s biggest agribusiness group to enter the growing market for meat alternatives. It said yesterday that it was planning an April launch for meatless patties and ground products to take on the likes of Impossible Foods and Beyond Meat. They will be sold to retailers, who will rebrand them to their own labels. Interestingly, Cargill has invested $100m in Puris, one of Beyond Meat’s pea protein suppliers. * SO WHAT? * Given the popularity of the trend for eating less meat, this kind of thing is bound to happen – and Cargill is now

throwing its considerable resources into this arena. I expect more to come! Impossible Foods and Beyond Meat need to make use of their early successes to avoid being gobbled up by sleeping giants.

On the UK high street, Primark warns of clothing shortages (The Times, Alex Ralph) shows that the coronavirus may result in shortages of some of the fashion retailer’s products given Chinese production delays and Alarm as Tesco opens first mainstream cashless store (The Times, Ben Martin) heralds the opening of a cashless Tesco on High Holborn in London as many consumers continue to move away from the use of notes and coins. There will be an array of paying options available, but obviously no cash. At the moment, there are no plans for any further cashless stores. * SO WHAT? * Some will argue that going cashless will be bad news for vulnerable groups, but it certainly seems to me that things are certainly heading in the cashless direction.

And finally, in other news…

As you will know by now, I’m all about learning and tasteful culture. It should therefore come as no surprise that I introduce you to a new style of art in Rubik’s Cube Mona Lisa fetches 480,000 euros at Paris auction (Relaxnews, AFP https://tinyurl.com/tpztz5z). Nice 😁