- In MACRO, MARKETS & CORONAVIRUS NEWS, the Fed makes a big cut – but markets take fright – and the coronavirus continues to wreak havoc on Iran, aviation, shipping and US shale oil producers
- In UK HIGH STREET NEWS, calls for a business rate overhaul increase and Greggs is on a roll
- In INDIVIDUAL COMPANY NEWS, Thermo Fisher buys Qiagen for $11.5bn, Foxconn aims for full China production and plant-based food manufacturers cut prices
- In OTHER NEWS, I show you what to do in the OMG-I-left-a-tissue-in-the-laundry nightmare and 12 amazing houses…
MACRO, MARKETS & CORONAVIRUS NEWS
So the Fed makes a big cut as the coronavirus fallout continues…
Federal Reserve cuts rates a half-percentage point in face of coronavirus (Financial Times, Brendan Greeley, Colby Smith and Chris Giles) reflects a unanimous decision by the Federal Open Market Committee (this is the US central bank’s equivalent of the Bank of England’s Monetary Policy Committee) to cut interest rates by 0.5% to range of 1-1.25% following a meeting by the G7 finance ministers and central bank governors to use “all appropriate policy tools” to get the global economy back on track. This is the Fed’s first emergency cut since the financial crisis. However, Wall Street plunges again as Fed’s rate cut fails to calm fears over coronavirus (Daily Telegraph, Tim Wallace) suggests that investors are now worried that the central bank is more concerned than it is letting on, hence the subsequent sell-off in the market. * SO WHAT? * It’s interesting to see that Trump is continuing to put pressure on the Fed to cut even deeper, but the irony of this is that he’s been banging on about interest rate cuts for ages (it’s a quick way of boosting the stock markets because it makes them look more attractive versus leaving money in the bank – it’s a bit more complicated than that, but this is the general gist). If Jay Powell had listened to him and done it before instead of leaving rates unchanged or taken them higher, he may not have had the leeway now to cut the interest interest rates as much as he has.
Fallout from the coronavirus continues in Coronavirus shatters trust in Iran’s leaders after cases surge (Financial Times, Namjeh Bozorgmehr) highlights the ongoing debacle in Iran as the number of cases has shot up from two to over 2,300 in the space of two weeks, prompting distrust over the regime’s handling of the outbreak. Even Iran’s supreme leader has had to intervene to stop people stop people going to the holy city of Qom to lick the gold
-plated lattice windows of the holy tomb in the belief that it will cure infections 🤢 and he has also called for Friday prayers in Iran’s major cities to be cancelled for the first time since the revolution in 1979.
In Airlines face merger after bookings go into freefall (The Times, Callum Jones) we see that the chief of one of the world’s biggest carriers, Air France-KLM, believes that the dramatic fall in bookings following the coronavirus outbreak will increase pressure on airlines to consolidate. So far share prices in airlines have cratered badly – low-cost carrier Norwegian, has fallen by 43%, Ryanair 25%, EasyJet 24%, Air France-KLM 22% and British Airways owner IAG by 21%. * SO WHAT? * I would have thought that bookings will pick up spectacularly when the all-clear is sounded (surely being in enforced confinement for ages+loads of cheap holiday offers = a surge in holiday bookings, although I guess it depends whether you got sick pay or not), but no-one knows what the gap is going to be between now and then. In the meantime, airlines need to get their heads down and dig in.
Elsewhere, Shipping broker issues profit warning (The Times, Callum Jones, Alex Ralph and Ben Martin) shows that leading shipping broker Braemar Shipping Services has highlighted that its earnings will take a hit due to the coronavirus as global trade takes a bashing and Cash-strapped US shale producers pray for Opec aid (Financial Times, Derek Brower) shows that US shale producers are hoping that Opec decides to implement production cuts in its meeting in Vienna this week that will boost oil prices. * SO WHAT? * On the one hand, Opec producers may enjoy watching their US competition squirm and then go out of business (their break-even points in terms of oil price are much lower than the equivalent level for US shale producers, because the production costs are much higher for the latter), but then the last time they tightened their belts to squeeze out the Americans, two years of pain for ALL producers followed. We’ll just have to see how that pans out.
UK HIGH STREET NEWS
Calls for business rate overhaul increase and Greggs continues to move forward…
Call for shake-up of business rates in Budget (Daily Telegraph, Laura Onita) shows that the pressure is increasing from businesses as nine groups – including the Association of Convenience Stores, British Chambers of Commerce, British Property Federation and Federation of Small Businesses – are making a concerted push for the chancellor to change the rules in next week’s Budget as they argue that the current regime is out-dated and puts undue pressure on firms that are already struggling. * SO WHAT? * This has been going on for years, but I would
have thought that the business groups are more confident about getting what they want this time around because of a new young chancellor with the first Budget of a new government and the fact that the number of business failures on the high street have continued to pile up, which supports their arguments.
Greggs profits still on a roll with a boom in its vegan snacks (The Guardian, Julia Kollewe and Zoe Wood) highlights strong results for 2019, but added that recent weather and flooding has slowed sales momentum. The flooding in south Wales resulted in a temporary closure of its bakery and distribution centre in Treforest, where it makes its vegan doughnuts, and 40 of its stores in the country. Other than that, things looked pretty good with a 27% rise in pre-tax profits but you would have thought that the coronavirus is going to have a negative effect at least for the first quarter.
INDIVIDUAL COMPANY NEWS
Thermo Fisher makes a big acquisition, Foxconn aims for normality and meatless cuts prices…
In a quick scoot around other news, Thermo Fisher to buy diagnostics group Qiagen in $11.5bn deal (Financial Times, Myles McCormick) shows evidence of the US scientific equipment maker’s efforts to broaden its disease-testing capabilities in the very topical acquisition of Dutch diagnostics group Qiagen, which is developing kits to test for Covid-19. It has previously made kits to test for SARS and swine flu. * SO WHAT? * Thermo Fisher’s interest in Qiagen goes back to before the coronavirus outbreak but you would have thought that current events would have made a deal even more compelling. This will steady the ship for Qiagen after a tricky 2019 where it lost its long-term chief exec and suffered weaker China sales and gives Thermo Fisher more R&D firepower and access to additional healthcare areas.
Then in Foxconn to resume full production in China by end
of month (Financial Times, Kathrin Hille and Sue-Lin Wong) we see that things are getting back to normal at the world’s biggest contract electronics manufacturer as staff levels are now at over 50% of what they normally are at this time of year. * SO WHAT? * This will be particularly important for Apple, who uses Foxconn to assemble its phones, but it may also have further repercussions in that other manufacturing facilities may use this as a precedent. This may, in turn, snowball and production could come back on line more quickly than anticipated – although of course things could go into reverse once more if the coronavirus starts to spread again.
And finally, Plant-based meat makers compete on price (Wall Street Journal, Jacob Bunge and Heather Haddon) shows that Impossible Foods has cut wholesale prices for its products by 15%. * SO WHAT? * This is unsurprising given the number of “new” entrants to meatless – including Neslé, Smithfield Foods, Cargill and Sysco – who are all fighting with each other to get the biggest slice of the action. The likes of Impossible Foods and Beyond Meat have made impressive inroads so far regarding distribution, but with more entrants to this area, they need to be more conscious of price to ensure they stay at the top of their game and don’t let bigger rivals overtake them.
And finally, in other news…
As you know, I always have the readers of Watson’s Daily’s interests at heart, so when I saw this I thought I had to share it with you: Japanese Twitter has its sanity saved with lifehack to deal with tissues left in your laundry (SoraNews24, Casey Baseel https://tinyurl.com/uu7s2fe). I haven’t tried it myself, but if it works this is phenomenal! Then how about having a look at some of the amazing places in 12 wilderness homes designed to survive every challenge (Lovemoney, Jen Grimble https://tinyurl.com/veaofxx). Wow!
Some of today’s market, commodity & currency moves (as at 0825hrs 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 **|
|6,718 (+0.95%)||26,243 (+1.26%)||3,036 (+1.09%)||8,684||11,985 (+1.08%)||5,383 (+0.75%)||21,100 (+0.08%)||3,012 (+0.63%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)