Wednesday 01/07/20

1. In MACRO & OIL NEWS, Hong Kong takes its Chinese medicine, the UK’s GDP craters but there’s talk of a V-shaped recovery while BoJo talks relaunch and Shell cuts asset valuations
2. In TRAVEL INDUSTRY NEWS, Airbus and Easyjet announce cuts while On The Beach looks on the bright side
3. In NEWS ON “WINNERS” & LOSERS, FedEx exceeds expectations and rental e-scooters get the go-ahead while US bankruptcies increase, a Chinese electric car manufacturer suspends operations and TM Lewin, Harveys and Bensons For Beds fall into administration
4. AND FINALLY, I bring you a mask solution for better haircuts…

So Hong Kong gets its medicine, UK GDP is a disaster but better things are promised and Shell downgrades valuations…

China draws condemnation for new Hong Kong security law (Financial Times, Nicolle Liu, Yuan Yang, Demetri Sevastopulo, Jamie Smyth and Michael Peel) shows the immediate reaction to China imposing the new security law which bypassed Hong Kong’s own legislature. Acts of terrorism, subversion, secession and “collusion with foreign elements” will now be punishable by up to life imprisonment and Chinese state security agencies will be able to operate openly in Hong Kong for the first time. The new law applies not only to those within the territory – it also applies to those outside it, meaning that vocal sympathisers can be prosecuted upon entry to Hong Kong or mainland China. Following this, Hong Kong pre-democracy groups disband after security law is passed (Financial Times, Nicolle Liu and Yuan Yang) highlights the disbanding of pro-democracy opposition party Demosisto and US bars arms exports to Hong Kong as it revokes special status (Financial Times, Katrina Manson and Demetri Sevastopulo) shows that the Americans were serious about their threat to revoke Hong Kong’s special status and have now banned the export of arms and sensitive tech there. * SO WHAT? * This all sounds rather scary to me – but it must be VERY scary for people who live there. This is also likely to spook any foreign businesses in Hong Kong (although I suspect no-one will be willing to say this publicly) and make it a lot harder to recruit staff to go there IMO. The reality of the law may well prompt new (or hasten existing) plans to leave and go to Singapore or Tokyo if a presence is required in the region.

Meanwhile, in the UK, Worst GDP fall since winter of discontent (The Times, Gurpreet Narwan) cites the latest

data from the Office for National Statistics which shows that GDP fell by 2.2% in the first quarter – more than it had initially expected and the biggest drop since 1979 when there were loads of strikes. Not to worry, though as Haldane: V-shaped recovery is on the cards (Daily Telegraph, Tim Wallace) shows that the chief economist of the Bank of England, Andy Haldane, reckons that the UK is in for a sharp recovery as consumer spending data, consumer confidence and business activity point to better things to come sooner than expected but The future may be V-shaped, but it would be rash to count on it (The Guardian, Nils Pratley) points out that he went on to say that things could go one of two ways in the second half of this year: higher spending and falling unemployment (which would support the V-shaped recovery) or higher unemployment (because of the end of furlough and lack of business activity) and lower spending (consumers being cautious). Let’s hope that his plan to invest in the public services, housing, transport and science he mentioned in Boris Johnson announces state-led post-coronavirus relaunch (Financial Times, George Parker, Jim Pickard and Chris Giles) comes good! * SO WHAT? * In short, there are some positive signs out there, but there are still some massive risks!

There’s more gloom in oil in Shell to cut £18bn from value of assets amid coronavirus crisis (The Guardian, Jillian Ambrose and Kalyeena Makortoff) as the oil major warned that it would be cutting valuations in the wake of current circumstances and expects poor oil demand for the next three years at least. It also outlined its oil price expectations for the next few years – $35 a barrel on average for the rest of 2020, $40 a barrel in 2021 and $50 by 2022. * SO WHAT? * When you hear oil majors like Shell and BP being so downbeat about oil, it does make you think that the current level of $40 a barrel is being supported by an awful lot of talk from Trump and the Saudis! On the other hand, you could say that they are being overly gloomy to deflect criticism of their cuts.

Airbus and Easyjet announce cuts while On The Beach is of a sunnier disposition…

The carnage continues in the air travel industry in Airbus to cut 15,000 in industry’s ‘gravest crisis’ (Daily Telegraph, Alan Tovey) which highlights the cuts that the company is planning on making – which include 1,700 jobs in the UK – as demand for air travel has just evaporated. Chief exec Guillaume Faury said “Airbus is facing the gravest crisis this industry has ever experienced”. Easyjet to close bases and cut staff (The Times, Robert Lea) deepens the gloom even further as the company makes moves to shut bases at Stansted, Southend and Newcastle airports with the loss of 2,000 employees. * SO WHAT? * This really is doomsday stuff and I expect it to continue. I just hope these businesses can last long enough to benefit from the uptick that WILL come eventually. Until then it’s all about

battening down the hatches and surviving. It’s not just the plane manufacturers and Easyjet staff who will lose out, though – many more will suffer in other companies that support and supply them.

On the beach? Families skip this year’s holiday and book ahead (The Times, Dominic Walsh) shows that On The Beach Group, which accounts for 20% of online sales in the short-haul beach holiday market, is sounding quite an upbeat tone as it announced that booking volumes are almost back to normal levels after a very sparse March and April. Chief exec Simon Cooper estimates that some holidays will be 10-15% cheaper than they were last year and that customers were basically writing this year off and booking for next year. Interestingly, On the Beach looks to lap up travel businesses caught in tide of pandemic problems (Daily Telegraph, Hannah Uttley) highlights the company’s £50m war chest that it is willing to use to buy up struggling rivals at bargain prices. It has been particularly keen to get a presence in Germany. We’ll just have to see what happens…

FedEx and e-scooters win, while US companies, a Chinese electric car manufacturer and some UK high street names all suffer…

And in the “winners” corner today, FedEx reports better-than-expected revenue as residential deliveries surge (Wall Street Journal, Paul Ziobro and Allison Prang) shows that the company benefited from a massive upsurge in online shopping during lockdown (no surprises there). However, what is interesting is that it says it is seeing a strong rise in international cargo, which would imply that there are early signs of recovery for the global economy.

There’s good news for those who like a bit of adrenaline with their commute in Rental e-scooters given go-ahead in green drive (Financial Times, Tanya Powley and Tim Bradshaw) as RENTAL electric scooters will be allowed on British roads from Saturday after parliament passed legislation yesterday to fast-track trials. This is all part of

the government’s efforts to encourage people to use ways of commuting that are greener and less coronavirus-prone than current modes of public transport. The scooters will be limited to 15.5miles per hour and won’t be allowed on pavements. Until now, they have been illegal in the UK. E-scooter operators include Lime, Bird, Spin, Tier, Voi and Dott will all be interested in a British launch!

And in the “losers” corner, US companies file for bankruptcy at fastest pace since 2013 (Financial Times, Joe Rennison and James Fontanella-Khan) highlights the frightening pace of business failure in the US at the moment, Chinese elecrtric car maker Byton suspends operations (Financial Times, Christian Shepherd and Emma Zhou) shows another Chinese electric car start-up in trouble and TM Lewin, Harveys and Bensons for Beds enter administration (Financial Times, Jonathan Eley) highlights ongoing problems for high street players. TM Lewin was only bought by private equity firm SCP last month, but having now bought it out of a pre-pack administration, it is going to close all of its 66 stores and let it live on online.

…in other news…

Words cannot do justice to the elation I will feel when I get my haircut next week. I’m pretty impatient when it comes to this sort of thing and my hair is now longer at the back and sides than it has been since I was 12! If only we had bits of kit like this in the UK: You can now get stick-on salon masks for haircuts in the coronavirus age in Japan (SoraNews24, Casey Baseel https://tinyurl.com/y9by7ck4). I might just have to improvise with a few bits of gaffer tape with a breathing hole in the middle. Taking it off may be a tad painful, but I think I can bear it. People pay a lot of money for exfoliation…