Tuesday 30/03/21

  1. In GLOBAL TRADE & VACCINE NEWS, we look at the Suez implications, Serbia’s vaccine latest, Canada’s AstraZeneca reticence and the possibility of certificates to go to the office
  2. In CONSUMER NEWS, firms plan to hire, Britons pay down debt, London property looks likely to get hit and Londoners look likely to pay more tax
  3. In IPO NEWS, Deliveroo lowers its valuation and Cazoo heads to New York
  4. In INDIVIDUAL COMPANY NEWS, fashion houses rue their morals and the Archegos thing continues to cause ructions
  5. AND FINALLY, I thought I’d leave you with some Pomplamoose…

1

GLOBAL TRADE & VACCINE NEWS

So we look at the implications of the Suez unblocking, Serbian and Canadian concerns and the possibility of office vaccine certificates…

Suez Canal ship finally free in boost for global trade (Financial Times, David Sheppard, Harry Dempsey, Heba Saleh, Leo Lewis and Kana Inagaki) shows that the Ever Given was finally freed at about 2pm London time yesterday. The head of the Suez Canal Authority, Osama Rabie, reckoned that the backlog of 422 ships at both ends of the waterway will be able to make the passage within 3-3.5 days. Suez Canal insurance claims to run into hundreds of millions of dollars (Financial Times, Ian Smith) highlights some of the financial consequences of the beached container ship, although its freeing will have at least put a cap on insurance claims and salvage costs. This will in turn pile more pressure on first half earnings for reinsurers who are already counting the costs of the US winter storms, Australian floods and coronavirus-related losses. Suez Canal blockage pressures global container supply (Wall Street Journal, Stella Yifan Xie and Joanne Chiu) contends that the shortage of containers, which emerged last year, is likely to get even worse than it already was due to the delays caused, resulting in a domino effect. On the other hand, Bumper profit for container ship operators despite Suez Canal blockage (Daily Telegraph, Oliver Gill) shows that some container ship operators are set to make more money in the first quarter of 2021 than they did in the entirety of 2020 – even when you include the effect of the Suez blockage! Freight rates are now 189% higher than they were last year and the blockage is expected to delay an expected drop. * SO WHAT? * Clearly this has been all over the news since it happened last week (I think it even came up as a question on Ant & Dec’s Saturday Night Takeaway – a sure sign that it really IS part of the general consciousness 😁), but ultimately I don’t think it will have many longer-term consequences as there was no malintent here (things would have been a lot different had it been a terrorist attack, for instance). Yes, it’s possible that some companies will probably discuss their reliance on just-in-time management but given the general lack of warehouse space everywhere because of the sudden rise in e-commerce volumes, I don’t think things will change any time soon.

In vaccine news, EU move on vaccine exports puts Serbia’s leader on edge (Financial Times, Valerie Hopkins) shows that Serbia’s relative success in vaccinating its population (it has administered over 2.1m doses of the coronavirus vaccine to a population of 7m) due to its reliance on Russian and Chinese vaccines could come to a shuddering halt if the EU decides to restrict exports and stop the supply of BioNTech/Pfizer and Oxford/AstraZeneca vaccines. Serbia aspires to EU membership, but the supermajority-holding president Aleksandar Vucic is a nationalist with close ties to Russia and China. * SO WHAT? * It will be really interesting to see what the EU does here as it is going to lose whatever it does. If it imposes the vaccine export ban it will damage its reputation as a reliable business partner, but if it doesn’t, it will face even more criticism about its woeful vaccine rollout. Either way, people will lose their lives – it’s just if they value the lives of EU member countries above everyone else.

In Canada urges halt in use of AstraZeneca Covid-19 vaccine in people under 55 (Wall Street Journal, Paul Vieira and Kim Mackrael) we see yet another kicking of the Oxford/AstraZeneca vaccine, this time by national drug regularor Health Canada, because of evidence in Europe of potentially serious side effects experienced by younger women. * SO WHAT? * This seems to becoming so commonplace now that I think it could go one of two ways. Either people just zone out and think that millions have taken the vaccine and been OK or they lose trust completely.

UK ministers weigh Covid certificates for offices (Financial Times, Jim Pickard and Daniel Thomas) shows that ministers are discussing plans to allow employers to use Covid-19 certificates for staff working in office buildings once the majority of people have been vaccinated later on in the year. Use of these certificates would mean that social distancing could be abandoned, allowing more people to be in one place at the same time. * SO WHAT? * Covid certificates would be less controversial than “vaccine passports” because they would allow alternative things like proof of antibodies or recent testing that would cover those who don’t get jabbed (e.g. pregnant women). I guess we’ll just have to wait to see what they come up with – but you can bet that the solution will not please absolutely everyone.

2

CONSUMER NEWS

Firms look to hire, Britons pay down debt but London is going to get a kicking…

There’s good news in Firms plan hiring spree as confidence soars (Daily Telegraph, Tom Rees) as the results of the Lloyds’ Business Barometer show that confidence in March showed one of the biggest jumps on record and that more bosses are thinking about hiring while Britons pay back most on debt in 27 years as credit card spending slumps (The Guardian, Phillip Inman) shows that consumers have been chipping away at their debts. Does this mean that they are making room for more spending?? I am inclined to think so.

However, Londoners look like they are going to get it in the neck with London to bear brunt of house price crunch (Daily Telegraph, Tim Wallace) as academics at the London School of Economics’ Centre for Economic Performance reckon that the stamp duty holiday bubble is expected to burst, with house prices in London and the

South East likely to suffer the most. Clearly this may be delayed if Sunak throws house-buyers another bone in the form of extended help. And if that’s not bad enough, Commuting slump risks tax raid on Londoners (Daily Telegraph, Oliver Gill) shows that Londoners could potentially face a tax hike as mayor Sadiq Khan tries to protect London’s transport network against the backdrop of falling commuter numbers. * SO WHAT? * A report from Moody’s says that underground and rail services will never return to their pre-pandemic levels (which I think is 🐎💩) as they contend that passenger numbers will fall permanently by 20%. I say this because I do not think think that Moody’s are any good with predictions (certainly on a longer term basis) and because I really believe that worker numbers will continue to drift upwards over time once this all dies down. Of course there needs to be a major overhaul in fares and services in general but I find it hard to believe that London will be a ghost town forever. I don’t have any fancy models or anything but I would wager that numbers will be back to pre-Covid levels within five years at the most – especially if we get the financial industry sorted following the Brexit debacle 👍.

3

IPO NEWS

Deliveroo cuts its valuation and Cazoo heads stateside…

Following on from the constant newsflow of big investors treating its forthcoming IPO with scepticism, Deliveroo forced to knock £1bn off valuation (Daily Telegraph, Morgan Meaker) shows that the food delivery app has been forced to cut its IPO launch price to between £3.90 and £4.10 per share because of “volatile market conditions”, effectively knocking £1bn off its previously stated valuation. * SO WHAT? * Yes, the investors said it was all about concerns about its business model and the possibility that its costs could suddenly increase as a result if they had to treat couriers as employees. However, TBH I think it’s also about the valuation, especially if they are thinking that we are reaching “peak takeaway” as we head into the lifting of lockdown. FWIW, I think Deliveroo needs to get this deal away so I wonder whether they’ll make any other concessions in addition to the lowering of the valuation. Maybe cut co-founder Will-Shu’s voting rights or other rights in some way?

Meanwhile, Cazoo avoids ‘risk-averse’ Britain for $7bn flotation (The Times, Simon Duke) shows that Cazoo is heading stateside to do an IPO because the founder says that UK investors have a lower appetite for risk than their American cousins. Cazoo was started up by Alex Chesterman (who also founded Lovefilm and Zoopla) in late 2018, with a launch in late 2019. It buys secondhand cars, reconditions them, sells them on to buyers and then delivers them to their homes with a seven-day money-back guarantee. The company has raised £450m in capital so far but needs more, hence the IPO. Cazoo: the need for speed in used car sales (Financial Times, Lex) says that Chesterman is hopeful of bringing Cazoo into profit by 2024 but that it needs the cash from an IPO to compete in an area where more rivals are entering the market all the time. * SO WHAT? * This just goes to prove the logic of listing via a SPAC from a company’s point of view – that you can get to market quicker and that you can take advantage of an investor base that is used to this kind of thing.

4

INDIVIDUAL COMPANY NEWS

China fashion faux-pas and trading problems…

In a quick scoot around some other big stories today, H&M ‘vanishing’ from China over human rights row (The Times, Didi Tang and Charlie Parker) shows a continuation of China’s backlash against brands that criticise its human rights record, as Chinese landlords are shutting H&M stores and Fashion brands/Xinjiang: cottoning on to an ethical dilemma (Financial Times, Lex) shows that the price of doing business in China appears to be the willingness to shelve corporate morals. Talking of which, it seems that Inditex (owner of Zara and other brands) is keeping rather quiet here – will they profit at H&M’s expense?

I referred to this yesterday, but Multi-billion Archegos losses will prompt banks to check hedge fund exposures (The Guardian, Nils Pratley) shows that there will now be concerns about other would-be Archegos incidents about to happen as Credit Suisse and Nomura warn of losses after Archegos-linked sell-off (Financial Times, Leo Lewis, Tabby Kinder and Owen Walker). I suspect that banks’ risk departments are going to be even busier than normal now as they check exposure!

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with a bit of music – a Pomplamoose/Britney Spears mash-up. Enjoy!

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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 **
6,736 (-0.07%)33,171.37 (+0.3%)3,971.09 (-0.09%)13,059.65 (-0.06%)14,818 (+0.47%)6,016 (+0.45%)29,433 (+0.16%)3,457 (+0.62%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$61.41$64.80$1,704.181.376731.17536110.141.17141$57,692.12

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