Financial Times Europe - 16 12 2020

2020·9.1 MB·English

WORLD BUSINESS NEWSPAPER
WEDNESDAY 16 DECEMBER 2020 EUROPE
Into the future Prosecuting Trump Martin Wolf
What will the world look like in five The potential criminal investigations If interest rates stay low, stock
years? waiting in the wings markets will only grow
— SPECIAL REPORT — BIG READ, PAGE 15 — PAGE 17
Oh no it isn’t
Briefing
Panto season
i Moderna jab ‘highly effective’, FDA finds
closes early The US Food and Drug Administration’s report on
Moderna’s Covid-19 vaccine found the jab to be safe
and “highly effective”, clearing the way for a second
inoculation to win emergency approval.
— PAGE 2
Guests take a selfie outside the Palla-
dium theatre in London’s West End yes- i China data herald economic recovery
terday as the pantomime season comes Beijing has reported industrial production and
to an abrupt and premature end follow- retail sales jumped 7 per cent and 5 per cent year on
ing tighter Covid-19 restrictions in Eng- year respectively, as economic recovery from the
land’s capital. coronavirus pandemic powers ahead.
— PAGE 3
Boris Johnson’s government is under
increasing pressure to rewind a relaxa- i Hungary sets legal curbs on gay rights
tion of rules over Christmas as infection Hungary’s parliament has
rates continue to rise across the UK. passed laws limiting gay rights,
Two leading health journals pub- changing electoral rules and
lished a rare joint article yesterday decreasing oversight of public
warning that allowing three separate funds, as prime minister Viktor
households to travel across the country Orban promotes “Christian
to stay with each other during the fes- family values”.
— PAGE 3
tive period was about to “blunder into
another major error that will cost many i McConnell acknowledges Biden win
lives”. Mitch McConnell has congratulated Joe Biden on
Report page 2 winning the US presidential election, making the
Senate’s top Republican the highest-ranking party
Toby Melville/Reuters
figure yet to break from Donald Trump.
— PAGE 4
Brussels threatens Big Tech with i Airlines warn on EU data rule breach
Carriers fear they will be in breach of strict
European rules on passenger data for flights to
Britain if they keep planes flying in the event of the
UK leaving the EU without a deal.
— PAGE 5
break up to curb monopoly power
i Cleveland to ditch ‘Indians’ name
Cleveland’s Major League Baseball team in the US
has announced that it is to drop “Indians” from its
name, after more than a century in use, once it has
settled on an alternative.
— PAGE 8
3 EU drafts new digital law 3 Privacy fears and low taxes spur hostility 3 Big fines weighed
i Thai protests fail to sway stance on king
A wave of protests in Thailand by demonstrators
seeking a new constitution and reform to the
Javier Espinoza — Brussels US tech companies such as Amazon, The companies must also have at least timetable for when they will come into monarchy may have sparked debate but has failed
Google and Facebook face growing hos- 45m users and be active in at least three force. But the new rules are likely to face to bend the state’s existing position.
— PAGE 3
The EU has raised the stakes in its tility in Europe for paying low taxes, EU states, the draft regulation said. at least two years of political wrangling
efforts to curb Big Tech by threatening invading privacy and crushing rivals. “We need to act quickly,” said Thierry and debates before approval.
Datawatch
to break up companies that repeatedly However, the prospect of breaking up Breton, one of the EU commissioners in The regulations would be among the
engage in anti-competitive behaviour in a US tech group would be daunting, said charge of the regulations. Otherwise, he world’s most stringent on tech compa-
No rush for millennials
the first overhaul of the bloc’s rules for Thomas Vinje, a partner at law firm Clif- warned, “we may destroy competition Commissioner nies. They are also an acknowledgment While more than
When US adults say they want a
internet businesses for two decades. ford Chance. “I don’t believe the EU and opportunities for some players that Thierry Breton: in the EU that competition law has 40 per cent of the
Covid-19 vaccine (%)
A draft of the new Digital Markets Act would risk breaking down [the alliance could have been successful innovators”. ‘We need to act failed to curb the growth and market youngest adults in
As soon as possible Wait a while
warned that technology companies that with the US] by threatening to break up Separately, the EU also released the quickly [or else] power of the Silicon Valley giants. Never No answer the US say they
break competition rules will face fines American icons,” he said. draft of its Digital Services Act, which is we may destroy Paul Tang, a Dutch socialist MEP, 0 2040 6080100 would have a
Covid-19 vaccine,
of up to 10 per cent of their global reve- “The Biden administration is not designed to force tech companies to opportunities said: “The commission’s plans are good Gen Z: Under 23
the number nearly
nues. Brussels also said the EU would going to let that happen easily.” take more responsibility for illegal beh­- for. . . successful but not good enough to curb the monop-
Millennials: 24-39 halves for the
move to break up any technology com- The EU said it would hold technology aviour on their platforms. It warned innovators’ oly power of tech giants. Instead, the
Gen X: 40-55 generation above
pany fined three times within five years. groups to a higher standard of regula- that companies that do not police them- commission should take direct aim and
them. Meanwhile,
Margrethe Vestager, the commis- tion, classing companies as “gatekeep- selves will face fines of up to 6 per cent of at least dismantle the perverse business Boomers: 56-74 the majority of
sioner in charge of competition and dig- ers”, with the power to dictate their global revenues. model of these tech giants: monetising Silent: 75+ over 75s said they
ital policy, said the EU would not hesi- markets if they have annual revenues in The commission’s draft proposals will personal data via advertising.” Sources: Fortune, SurveyMonkey would get a jab as
tate to “impose structural remedies, the European economic area of at least be voted on by the European Parliament Editorial Comment page 16 (Nov 30 - Dec 1 2020) soon as possible.
divestitures, that sort of thing”. €6.5bn in the past three financial years. and Council of Ministers. There is no Lex page 18
UK draws up plans to rival Singapore
with post-Brexit shipping tax regime
Peter Foster — Brighton cadets directly on behalf of shipping flag has declined by a third, according to
Jim Pickard — London companies has also been mooted. a report prepared for the government,
The UK is drawing up plans to turn The proposals, described as “blue-sky because of uncertainty over the future.
London into a rival for Singapore as a thinking” by one person familiar with The proposals say this could partly be
hub for shipping companies to register their contents, are being worked on as addressed with a “hearts and minds”
Sanctions on Turkey set their vessels following the end of the EU-UK trade talks reach a crunch point campaign to persuade shipping compa-
tricky entrance for Biden Brexit transition period, according to in Brussels — with the issue of managing nies to register their vessels in the UK.
people briefed on the proposals. UK regulatory divergence the biggest According to calculations provided to
Analysis i PAGE 3 bone of contention. the government, revamping the UK’s
Industry bodies and unions have been One proposal is that companies shipping tax and regulation regime
canvassed over the reform of the ship- choosing to register their vessels in the could be worth £3.7bn over three years
Austria €3.90 Malta €3.70 ping industry’s so-called tonnage tax UK could face a “lighter touch” test for and create 2,500 jobs directly, and
Bahrain Din1.8 Morocco Dh45
Belgium €3.90 Netherlands €3.90 after January 1 2021, when the UK is no how much of their shipping is managed 25,000 in related companies.
Bulgaria Lev7.50 Norway NKr40
Croatia Kn29 Oman OR1.60 longer subject to the EU’s state aid in the UK — a key requirement under David Blumenthal, a tax partner with
Cyprus €3.70 Pakistan Rupee350 regime on subsidies. EU tonnage tax regimes. The proposal Clyde & Co, who handles tonnage tax
Czech Rep Kc105 Poland Zl 20
Denmark DKr38 Portugal €3.70 Plans include expanding the scope of seen by the Financial Times repeatedly issues, said the UK’s departure from the
Egypt E£45 Qatar QR15
Finland €4.70 Romania Ron17 the UK scheme by counting oil rigs as references Singapore as a benchmark EU was an opportunity.
France €3.90 Russia €5.00 “ships” for tax purposes — which is not for the UK’s post-Brexit aspirations. “The idea is that if we’re not con-
Germany €3.90 Serbia NewD420
Gibraltar £2.90 Slovak Rep €3.70 allowed under EU rules controlling the The Department for Transport said: strained by EU state aid, we could have
Greece €3.70 Slovenia €3.70
subsidy of maritime transport — in “We do not comment on leaks.” more ability to do things that would
Hungary Ft1200 Spain €3.70
India Rup220 Sweden SKr39 order to attract more business. A £30m Since the Brexit vote in 2016, the ton- make the UK more attractive to ship-
Italy €3.70 Switzerland SFr6.20
Lithuania €4.30 Tunisia Din7.50 government-funded scheme to train nage of ships registered under the UK ping companies,” he said.
Luxembourg €3.90 Turkey TL19
North Macedonia Den220 UAE Dh20.00
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DECEMBER 16 2020 Section:FrontBack Time: 15/12/2020 - 19:06 User: andy.puttnam Page Name: 1FRONT USA, Part,Page,Edition: EUR, 1, 1
2 ★ FINANCIAL TIMES Wednesday 16 December 2020
INTERNATIONAL
Pandemic UK restrictions
US finds Moderna vaccine ‘highly effective’ Johnson urged
to rethink
festive rules
FDA declares treatment expand access to Covid-19 vaccines in cinated group. There were no deaths stopping people developing Covid-19 body in a bubble of fat to teach the
safe, raising prospect the US, where the pandemic has killed from Covid-19 in either group. disease. But if the vaccine can also stop immune system to respond to the virus. or put ‘many
more than 300,000 people, according to Moderna’s vaccine may also be the the infection, it could help control the The FDA scientists said there were no
of wider access this week Johns Hopkins University data. While first to show some impact on asympto- spread from person to person. People safety concerns that should prevent an
lives’ at risk
the US government has been offering to matic infections, according to a docu- who become infected can spread the emergency authorisation, but there was
help Pfizer expand manufacturing ment submitted by the company after virus before they show symptoms — and not enough evidence for how the vac-
Hannah Kuchler — New York
capacity, it secured another order for 30-40 per cent never show symptoms. cine worked in under-18s and pregnant
Kiran Stacey — Washington
100m Moderna vaccines last week, If the vaccine can stop The report will be examined by an and breastfeeding women, who were
The US regulator has found Moderna’s bringing its total to 200m. outside panel of experts, who will give a not in the trials. Sarah Neville and
the infection, it could
coronavirus vaccine to be safe and The FDA report said: “The two-dose recommendation tomorrow on whether The most common side effects for the Jasmine Cameron-Chileshe — London
“highly effective”, clearing the way for a vaccination regimen was highly effec- help control the spread to approve the vaccine on an emergency Moderna vaccine were pain at the injec- The pressure on Boris Johnson to
second jab to receive emergency use tive in preventing PCR-confirmed Cov- basis for people aged 18 and over. The tion site, fatigue and headache. There rethink a relaxation of Covid-19
from person to person
authorisation this week. id-19 occurring at least 14 days after FDA will give its final decision after that. were no cases of allergic reaction, as has restrictions over Christmas grew yes-
The US Food and Drug Administra- receipt of the second dose.” Moncef Slaoui, President Donald been seen in two participants in Pfizer’s terday when two health journals pub-
tion report on Moderna’s vaccine trials, After both jabs, the vaccine was 94.1 its original application. According to the Trump’s vaccine tsar, said on Monday vaccination programme in the UK. lished a rare joint article warning the
published yesterday, suggested immu- per cent effective in a trial of about drugmaker, just 14 people who received he expected Moderna’s vaccine to be There were cases of potential side UK prime minister was about to “blun-
nity starts about 10 days after the first of 30,000 participants. The vaccine was the vaccine during a clinical trial tested authorised this week. It is based on the effects similar to those found in Pfizer’s der into another major error that will
two injections, much like the one made less effective in people over the age of positive for Covid-19 but did not show same messenger ribonucleic acid, or data. Three participants experienced cost many lives”.
by Pfizer and BioNTech, which received 65, with an efficacy rate of 86.4 per cent. symptoms, compared with 38 partici- mRNA, technology as the Pfizer/BioN- Bell’s palsy, a weakness of facial mus-
emergency use authorisation last week. There were 30 severe cases of Covid-19 pants who received only a placebo. Tech vaccine. A genetic code to the cles, but one in the placebo group. The concerted message from the BMJ
A second approval could significantly in the placebo group but none in the vac- So far, all the vaccines have focused on virus’s spike protein is delivered into the Anjana Ahuja see Opinion and the Health Service Journal — only
the second in their century-old histories
— came amid alarm over the conse-
quences for the health service of a surge
in cases at a time of year when it is under
Netherlands
greatest strain from winter ailments.
Keir Starmer, leader of the opposition
Retailers reel Labour party, has also called on the
prime minister to review the planned
festive easing. The government had
from curbs
“lost control of infections, putting our
economy and our NHS at grave risk in
the new year”, Sir Keir said.
Writing before a ministerial meeting
today to review the tiered restrictions
A street in Amsterdam is almost for England, the medical journals said
deserted yesterday as a tough second that when the government had devised
lockdown came into force in the the plans to soften curbs over Christmas
Netherlands, leading to the closure of it had assumed the Covid-19 demand on
shops during the busiest and most the NHS would be decreasing.
lucrative part of the year. “But it is not, it is rising, and the emer-
“Obviously it is a big loss, this time gence of a new strain of the virus has
of year is extremely important to us,” introduced further potential jeopardy.”
said Robert Reuter, the owner of City Hospital admissions and deaths have
Diamonds. “It is a very hard decision, risen in recent weeks and, the journals
it is bitter for us.” said, the government had been too slow
The lockdown comes as to introduce curbs in the spring and
coronavirus infections rose to record again in the autumn. “It should now
levels in the past week. All schools reverse its rash decision to allow house-
and non-essential stores will be hold mixing and instead extend the tiers
closed for at least five weeks, along over the five-day Christmas period in
with hairdressers, beauty salons, order to bring numbers down in the
gyms, museums and zoos. advance of a likely third wave.”
The national shopkeepers’ They urged ministers to review and
association warned of the strengthen the tier structure, which
“disastrous” effects on retailers. “For they said had failed to suppress rates of
many shops this is more than they infection and hospital admissions.
can bear,” it said. Reuters, Amsterdam Unless action was taken to change the
trajectory, hospitals in England were
Piroschka van de Wouw/Reuters likely to have just short of 19,000 Covid
patients on New Year’s Eve — almost
exactly the same as the 18,974 peak of
Rule of law the first wave on April 12.
In a letter to Mr Johnson, Sir Keir said
Taxpayers alert to misuse of recovery funds, warns EU
it had become clear over recent days
that the tier system introduced two
weeks ago had failed to control trans-
mission of Covid-19.
“Sadly, it does now appear that the
Michael Peel and Sam Fleming which was a response to concerns about powers in an “activist” way, but would on their operation. “There is a big from observers including George Soros, government has — once again — lost
Brussels growing authoritarianism and corrup- be “precise and transparent”. The com- demand for accountability from EU the billionaire backer of liberal causes, control of infections, putting our econ-
EU taxpayers’ trust in the bloc’s ability tion in some member states. mission plans to assess adherence as institutions,” she said. “And one of those who branded it a cave-in to “extortion” omy and our NHS at grave risk in the
to safeguard their money will be dam- Ms Jourova said the EU had “plenty of soon as the rules come into force in the biggest demands . . . is: ‘We are giving from Hungary and Poland. Some Euro- new year,” he said.
aged if Brussels fails to wield new pow- work” to do to convince citizens “we are new year, she said, while working from you the money but you need to make pean parliamentarians have also ques- “If you conclude with government sci-
ers to withhold funds from countries doing proper things with their money” “day one” to create detailed guidelines sure it will not pay for the wrong things, tioned whether it breaks EU law entists that we need to take tougher
that misuse them, a senior European as it attempted to revive the region’s the wrong people, the wrong systems’ — because it constrains the commission’s action to keep people safe over Christ-
Commission official has warned. coronavirus-ravaged economies. I mean political systems.” ability to act. mas, then you will have my support.”
“When you distribute more money, The rule of law plan won the go-ahead Ms Jourova said she hoped the ECJ The prime minister’s spokesperson
The “river of money” created by the you should also bring in more guaran- last week after EU leaders agreed to a would not take years to decide on the said the government still intended to
EU’s €1.8tn pandemic economic recov- tees so people can trust you will protect non-binding declaration to assure Hun- matter. She added that she hoped the relax Covid-19 measures from Decem-
ery package highlighted the need for the it,” she said. “If you don’t have that trust, gary and Poland that they would not be existence of the mechanism would in ber 23 but stressed that the guidance
extra safeguards, said Vera Jourova, a the willingness of taxpayers to contrib- singled out under the new regime. Both itself act as a “very strong” deterrent to was being kept “under constant review”.
commission vice-president, who vowed ute to the European budget will go countries are the subject of so-called wrongdoing by member states. Steve Barclay, chief secretary to the
to move quickly to assess capitals’ com- down.” Article 7 disciplinary proceedings that “I do not leave anyone in any doubt Treasury, said that while the public
pliance with the rules. Ms Jourova acknowledged the way have stalled because each has vowed to that I am ready to use this tool when would not be criminalised for visiting
EU leaders last week finally approved the commission used the powers would ‘It will be a stress test veto action against the other. necessary,” said Ms Jourova, adding that families over the five-day window, peo-
rule of law checks on payouts from the put it under “incredibly severe scru- The rule of law compromise also gives the rule of law played an essential “uni- ple ought keep mixing to the minimum.
also for us, but I am
bloc after Poland and Hungary dropped tiny” from member states, the Euro- the European Court of Justice a role in fying role” in holding the European bloc “People shouldn’t misinterpret what
opposition that threatened to delay the pean Parliament and the public. “It will sure we can do it’ judging the legality of the new mecha- together. the guidelines say. It is not saying that
entire budget. The two countries lifted be a stress test also for us, but I am sure nism, should it be challenged by a mem- “If we have failures in some member people must go and see family . . . It is
their veto after receiving concessions on we can do it,” she said. Vera Jourova ber state in court even before it is used. states, then the degradation of the sys- important that people do the minimum
the application of the new mechanism, She said Brussels would not use its The outcome has sparked criticism tem is obvious,” she added. that is possible,” he said.
Sweden
MAKE A SMART INVESTMENT
Stockholm blamed for virus strategy that ‘failed’ elderly people
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Richard Milne governments that also possessed this tion of deaths among the elderly as of persuading doctors into care for the
TrumFRpIDAY3v1MsARCtH2h017eValley AFiveStWaORrLDpBUlaSINnES?SNEWSPAPER DUKe£2.7a0ChranneDlIslandos£3n.00;R.e.p.ublicofIreland€3.00 Nordic and Baltic Correspondent information,” it added. other European countries but its death elderly.
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Sweden: Responsible Publisher - Christer Norlander
Published by: The Financial Times Limited, employed in the elderly care sector were in Stockholm. infected residents of care homes were
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DECEMBER 16 2020 Section:World Time: 15/12/2020 - 18:12 User: sanjay.gohil Page Name: WORLD1 USA, Part,Page,Edition: EUR, 2, 1
Wednesday 16 December 2020 ★ FINANCIAL TIMES 3
INTERNATIONAL
Missile sanctions amount to
Economic recovery
China powers ahead with rosy
figures for industry and retail
US shot across Turkey’s bow
Thomas Hale — Hong Kong up 2.6 per cent over the year to date,
while in November the unemployment
China’s economic recovery from the
rate edged down to 5.2 per cent — the
coronavirus crisis powered ahead in
Measure viewed as mild but points to deep strain between two Nato allies same level it was in December last year.
November as key indicators of activity
Ting Lu, chief China economist at
rose at their fastest rates this year.
Nomura, warned that the strong read-
Industrial production jumped 7 per cent ings in November and momentum in to
Laura Pitel — Ankara year on year in November, edging up December added some “upside risk” to
Katrina Manson — Washington from 6.9 per cent a month earlier, while the bank’s forecast for 5.7 per cent real
After years of fretting that Turkey retail sales rose 5 per cent. Both metrics gross domestic product growth in the
would face crippling economic meas- grew more than in any other in 2020. fourth quarter.
ures for its decision to buy a Russian- China’s economy returned to growth Oxford Economics upgraded its
made air defence system, foreign inves- in the second quarter after a historic forecast for China’s full-year growth to
tors reacted with relief to the US’s rela- decline at the start of the year. The 2.1 per cent and expects growth of
tively restrained sanctions this week. recovery has been stoked by the coun- 8.1 per cent next year. Louis Kuijs, head
“The sanctions are very mild,” said try’s industrial sector and strong export of Asia economics at the consultancy,
Gilles Seurat, a fund manager at La growth while other big economies have expected a tightening of policy to weigh
Française, a Paris-based asset manager. foundered. on quarter-on-quarter growth next
Investors could “at last put this S-400 The comeback has allowed China to year. “We expect the macro policy
issue behind us with no economic cost play a more dominant role in global stance to shift from expansionary to
for the country”. trade, which also gathered pace last contractionary, with the overall govern-
Nevertheless, the decision to impose month. Exports rose 21.1 per cent in dol- ment deficit declining and monetary
measures on a Nato ally underlines the lar terms in November, the biggest rise policymakers aiming to contain macro
deep strain between Turkey and its since February 2018, pushing the trade leverage,” he said.
western partners — and serves as a surplus to its highest level on record. Leverage has emerged as a concern
reminder of the thorny foreign policy Retail sales growth was buoyed in for policymakers in China, with the gov-
challenge awaiting Joe Biden when he November by “Singles’ Day”, the world’s ernment in August seeking to control
takes office in the US next month. biggest shopping festival. Gains in borrowing in the property sector as
“The Biden administration will still spending came despite concerns that house prices rose sharply.
have to deal with the S-400 crisis,” said consumption was lagging behind a Over recent weeks, China’s credit
Asli Aydintasbas, a senior policy fellow wider recovery in China. The figure market has also been rocked by
at the European Council on Foreign remains down 4.8 per cent in the first 11 defaults. New home prices in November
Relations. “It’s a fairly significant thing months of the year compared with the rose 0.1 per cent compared with a
for a Nato country to be sanctioned by same period in 2019. month earlier, but were up 4 per cent
the US. Getting to a place where the Fixed asset investment, meanwhile, is year on year, official data showed.
S-400s are no longer an issue between
Turkey and the US will be tough.”
Even if the immediate financial
impact of the sanctions was limited, Australia
with the embattled Turkish lira enjoy-
Beijing coal ban would breach
ing a calm day of trading yesterday, the
measures risk striking a blow to the
defence sector that Recep Tayyip WTO rules, warns Canberra
Erdogan, Turkey’s president, has taken
great pride in expanding.
Turkey now produces armoured vehi-
cles, tanks, helicopters and drones but
they require foreign parts. Defence ana- Jamie Smyth — Sydney foreign policy. A memo leaked to Aus-
lysts warn that western companies may tralian media last month by a Chinese
Canberra has asked Beijing to clarify
be hesitant to work with Turkish groups diplomat cited Canberra’s ban on Hua-
whether it has formally banned Aus-
for fear of falling foul of US sanctions. wei from the country’s 5G network and
tralian coal, warning that such a move
“While the Turkish defence industry “disinformation” about China’s han-
would breach World Trade Organiza-
isn’t going to collapse, it will be incon- dling of coronavirus as among the rea-
tion rules and harm both countries.
venienced,” said Aaron Stein, a Turkey sons for the deterioration in relations.
expert at the Foreign Policy Research Scott Morrison, Australia’s prime minis- China has imposed sanctions on bar-
Institute in Philadelphia. “It will cause ter, said yesterday he was seeking expla- ley, beef and wine following Canberra’s
some pain.” That meant that Turkey — nations about Chinese state media call for an inquiry into the origins of the
already suspended from the US-led F-35 reports that the country’s economic pandemic in Wuhan.
fighter jet programme for the S-400 Happier times: spending measure passed by Congress Sanctions argue poses a security threat to Nato advisory body decided at the weekend Mr Morrison said there was no pros-
purchase — was likely to be eager to “get Donald Trump last week with a veto-proof majority but technology, but Mr Stein warned: “If the to allow power stations to import coal
are
these sanctions lifted”, he said. hosted Recep which has yet to be signed into law — Turks are going to be intransigent and without clearance restrictions, with the
There are signs that Turkey is open to Tayyip Erdogan stipulates that S-400 sanctions can be ‘designed unwilling to compromise then even peo- exception of Australia. Loading up:
imported coal is
talks. Mr Erdogan, who has often used at the White lifted only if Turkey “no longer pos- ple who want to lift [these measures] The development follows Beijing’s
to push the transferred from
harsh language with the US, has toned House a year ago sesses” the system. are going to have problems.” imposition of informal trade sanctions,
a cargo vessel
down his rhetoric following Mr Biden’s for trade talks. “That’s never going to happen,” said Turks, but There are other obstacles. The two which have left dozens of cargo ships at Rizhao in
presidential election victory and ahead Below, a truck Mr Stein. “So the Biden administration nations remain at odds over Syria, carrying Australian coal stranded off eastern China
not trash
of possible sanctions from Europe. Last with S-400 is going to have to make the case for where Washington supports Kurdish the Chinese coast and unable to unload
week he stressed Turkey’s “deep-rooted missile system Turkey. Turkey is going to have to do things’ fighters that Turkey views as a national shipments, in some cases for months. pect that he would change policy to
political and economic relations with parts arrives something.” security threat. “It would be a bad outcome for the meet Chinese demands, which would
the US and the EU”, adding: “There is no in Turkey Turkey could commit never to use the Mr Biden, who told the New York trading relationship between Australia impinge on Australian sovereignty.
issue that cannot be solved through dia- Alex Edelman/Bloomberg; AP Russian system, which US officials Times in 2019 that Mr Erdogan was an and China, that both countries benefit The threat to Australian coal targets a
logue and co-operation.” “autocrat”, has vowed to prioritise from,” Mr Morrison said of the reports commodity that generated A$55bn in
Yet it remains unclear whether he is human rights, putting him on a collision in the Global Times, the Chinese nation- export earnings in 2019. Australian
willing to make the compromises that course with a Turkish leader harsh with alist tabloid. “If that were the case, that thermal coal exports fell 14 per cent
will be demanded of him in return for domestic political opponents. would obviously be in breach of WTO year on year in the third quarter with
the lifting of sanctions and a normalisa- Still, advocates of rebuilding the rela- rules. It would obviously be in breach of shipments to China dropping more than
tion of US-Turkey ties. tionship argue there is much to be our free trade agreement . . . It really is 50 per cent, according to Fitch. Ship-
Daniel Fried, a former senior state gained, not least pulling Turkey away lose-lose here.” ments to India rose 96 per cent over the
department official who covered Tur- from Russia’s orbit. China is Australia’s largest trade part- same period, “suggesting some of the
key, said the Biden administration Many analysts believe Mr Erdogan ner, with trade totalling A$252bn cargoes heading to China were redi-
needed to craft a “reset” with Turkey. will enter the Biden era in search of bet- ($190bn) in 2019. But over the past two rected”, the agency said.
“[But] Erdogan’s got to want to do this,” ter relations. However, Soner Cagaptay, years, relations have soured as Canberra Additional reporting by Thomas Hale in
he said, adding that the sanctions were a senior fellow at the Washington Insti- has resisted Beijing’s more aggressive Hong Kong
“designed to push the Turks, but not tute for Near East Policy, warned that
trash things”. any optimism might not last. “If the past
A clause in this year’s National offers any lessons, I think it will start
Defense Authorization Act, a defence well but it won’t end well.” Law changes
Hungary limits gay rights and
South-east Asia. Democracy movement restricts opposition parties
Thai students fail to sway state’s stance on monarchy
Valerie Hopkins — Budapest ther restrict democracy in Hungary.
One limits the definition of “public
Hungary’s parliament has approved
Protesters have broken taboos Despite opening a space for protest, governing decisions while in Germany. tee” proposed by the military-domi- laws limiting the rights of gay couples, funds” in a way that undermines over-
however, analysts said the students had Nine senators in the US, Thailand’s nated parliament to gather pro-monar- sight, according to the Hungarian Hel-
changing electoral rules and decreas-
but struggled to get military failed to budge the military-backed roy- main military ally, introduced a resolu- chy and pro-protest representatives, sinki Committee, a Budapest-based
ing oversight of public funds.
alist establishment on their three core tion this month supporting the democ- dismissing it as a delaying tactic. human rights organisation.
government to change course demands: the resignation of Prayuth racy movement and urging the govern- As protests massed outside parlia- The package passed yesterday included The package also includes a law that
Chan-ocha, the prime minister; a new ment to “care for the rights and wellbe- ment last month, MPs agreed to con- an anti-LGBT constitutional amend- doubles the number of constituencies in
constitution; and reforms to the monar- ing of children and students”. vene a committee to redraft the consti- ment stipulating that “the mother [of a which parties must field candidates to
John Reed — Bangkok
chy. The protesters have also struggled Kanokrat Lertchoosakul, assistant tution. But they rejected a motion child] is a female, the father is a male”. compete nationally, making it more dif-
“Long live the Queen!” people cried, as to attract broader support from rural professor of political science at Chu- backed by the protesters and the oppo- It also states that only married cou- ficult for them to challenge Fidesz. The
Parit Chiwarak, a leader of Thailand’s and working-class Thais, but some older lalongkorn University, said the protest- sition Move Forward party that would ples can adopt children, in effect exclud- government said the new law would pre-
student-led protests, took the stage in a allies have been won over to their cause. have put the entire charter, including an ing homosexuals because gay marriage vent “fake parties” from competing.
bouffant wig and pink gown similar to Thais used to quail at the thought of ‘[Students] haven’t been article guaranteeing the king’s privi- is not allowed. Opposition parties had vowed
those of the country’s Queen Suthida. criticising the monarchy even obliquely. leged legal status, up for discussion. The laws are the latest in a series unprecedented co-operation in the
successful in compelling
Mr Parit, known as Penguin, deployed Now, everything — including the king’s The king described the country as a promoting so-called Christian family 2022 general election in the hope of
the camp attire for a skit at a recent power, his multibillion-dollar fortune, the government to the “land of compromise” in impromptu values promulgated by Viktor Orban’s stripping Fidesz of its supermajority. A
demonstration. But Thailand’s youth share of the state budget and residence comments to Britain’s Channel 4 news socially conservative government. recent poll put their combined popular-
negotiating table’
protesters were making a serious in Germany — can be discussed openly. last month. However, the Prayuth gov- Mr Orban’s coalition enjoys a super- ity 4 percentage points ahead of the rul-
demand: the scrapping of Article 112 of Thai Rath, the country’s top-selling ernment has begun taking a harder line majority in parliament. It is the ninth ing party and its coalition partner.
the criminal code, the lèse majesté law tabloid newspaper, recently published a ers’ “first point of success” had been to prosecuting protest leaders, setting the time the constitution has been amended The amendments came as the EU’s
used to threaten or jail critics of King front-page story about the protesters’ broaden the scope of debate. “The stu- stage for further conflict in 2021. since it was rewritten in 2011 by the pre- biggest political group, the European
Maha Vajiralongkorn and his family. demands to abolish Article 112, high- dents have proved that Thai society was After suspending lèse majesté prosecu- mier’s allies. Earlier this year, parlia- People’s party, debated the potential
Panusaya Sithijirawattanakul, known lighting the extent to which the for- ready to discuss this issue; they just tions on the king’s orders in 2017, ment made it legally impossible for expulsion of Tamas Deutsch, the Fidesz
as Rung, another protest leader, read merly self-censoring media now feels needed someone to open the door.” authorities are now wielding the feared Hungarians to change their gender. party caucus leader who became caucus
out the names of Thais charged under free to broach once off-limits topics. Mark Cogan, associate professor of law more widely. Police have sum- Yesterday’s vote came just after chairman after ex-MEP Jozsef Szajer
the law, which carries a maximum 15- The democracy movement has also peace and conflict studies at Japan’s moned at least 41, including Mr Parit Mr Orban withdrew his threat to veto was caught at a Brussels gay sex party.
year prison term. employed subversive humour, viral Kansai Gaidai University, agreed that and Ms Panusaya, for lèse majesté inves- the EU’s €1.8tn budget and recovery Mr Szajer wrote much of the country’s
Such scenes would have been unimag- memes and visual puns, donning dino- the students had made it possible to dis- tigations, according to Human Rights package, over objections to tying funds anti-LGBT constitution.
inable six months ago. But Thailand’s saur costumes at one point in reference cuss once-forbidden topics, but added: Watch. to rule-of-law benchmarks. Critics say Mr Deutsch is under fire for saying
young protesters have sparked an to Thailand’s gerontocratic leadership — “They haven’t been successful at all in “The king said this is the land of com- Mr Orban’s government and far-right group leader Manfred Weber used tac-
unprecedented political debate with to advance their causes. compelling the government to the nego- promise, but this is not a land of com- Fidesz party have run roughshod over tics reminiscent of Nazi and commu-
dozens of demonstrations in Bangkok The movement has gained interna- tiating table.” promise,” said Ms Kanokrat. “With an the rule of law and European values. nist-era secret police in recent debates
and elsewhere since July that have tional attention; Berlin has said it will Protesters and opposition parties uncompromising, strong state, what Watchdogs warn that two other over tying EU funds to rule of law bench-
drawn tens of thousands of people. oppose Thailand’s head of state making have rejected a “reconciliation commit- can we expect in the near future?” changes to the constitution could fur- marks. Mr Deutsch has apologised.
DECEMBER 16 2020 Section:World Time: 15/12/2020 - 18:39 User: sanjay.gohil Page Name: WORLD2 USA, Part,Page,Edition: USA, 3, 1
4 ★ FINANCIAL TIMES Wednesday 16 December 2020
INTERNATIONAL
Electoral College Bipartisan push
McConnell congratulates Biden on victory Support for
reduced US
stimulus
High-ranking Republican result but our system of government has of electors equal to a state’s total con- administration if Democrats are unable lenges that the world is encountering
acknowledges result but processes to determine who will be gressional delegation, which is in turn to win two Senate run-offs in Georgia now, despite their differences”. package
sworn in on January 20,” added the sen- determined by the census. next month, which would allow the “For my part I am prepared for inter-
Trump has yet to concede ator from Kentucky. Mr Trump has not directly com- party to reclaim control of the upper action and contact with you,” the Krem-
grows
Since Mr Trump’s defeat on Novem- mented on the college vote. However, chamber of Congress. lin quoted Mr Putin as writing.
ber 3, many Republican lawmakers Mr Biden has insisted he will work Mr López Obrador praised Mr Biden’s
Lauren Fedor — Washington
have hesitated to contradict the presi- ‘[The US] has officially across the political aisle to strike com- more liberal stance on immigration and
Mitch McConnell, the Senate’s top dent, who has claimed, without evi- promises, and said he had spoken to a said he hoped they could speak soon.
a president-elect and a
Republican, has congratulated Joe dence, that the vote was rife with fraud. number of for­mer Republican col- “We are certain that with you as US James Politi — Washington
Biden on winning the US presidential But late on Monday, senior Republi- vice-president elect’ leagues in the Senate. president, it will be possible to continue
US congressional leaders are facing
election, making him the highest-rank- cans, including Lindsey Graham of The college vote also prompted con- applying the basic foreign policy princi-
increasing pressure to agree compro-
ing Republican yet to break with Donald South Carolina, John Cornyn of Texas Mitch McConnell gratulations for Mr Biden from world ples enshrined in our constitution, espe-
mise fiscal stimulus legislation, as sup-
Trump, who has refused to concede. and Chuck Grassley of Iowa, acknowl- leaders who had waited for the result, cially non-intervention.”
port grows for a slimmed-down $748bn
Mr McConnell, the Republican major- edged that Mr Biden was the president- yesterday he retweeted messages call- including Vladimir Putin of Russia and Mexico is considering two bills that
package championed by a bipartisan
ity leader in the Senate, said yesterday elect after he officially received 306 ing into question the election result. Mexico’s Andrés Manuel López Obra- critics say could complicate co-opera-
group of senators.
that the US “has officially a president- electoral votes, to Mr Trump’s 232. Mr McConnell yesterday described dor. The Kremlin said yesterday a tele- tion with the US on security and finance.
elect and a vice-president elect” after Under the US constitution, the presi- Mr Biden, a senator who was Barack gram had been sent wishing Mr Biden Additional reporting by Jude Webber in The proposal, which includes aid to
the Electoral College vote on Monday. dent and vice-president are selected not Obama’s vice-president, as “no stranger “the utmost success” and hoping that Mexico City and Max Seddon in Moscow small businesses and funding for unem-
“Many of us hoped that the presiden- by the popular vote but by the Electoral to the Senate”. The Republican could yet Moscow and Washington could “really Prosecuting a president see FT Big Read ployment benefits, represents a last
tial election would yield a different College. The system allocates a number be a thorn in the side of the Biden help to solve many problems and chal- Edward Luce see Opinion chance before the holiday recess for an
agreement on government support as
the US struggles with surging coronavi-
rus infections.
Fed meeting Policymakers ponder extra monetary support To make it more palatable to both
parties on Capitol Hill, the moderate
lawmakers stripped out contested pro-
visions regarding liability protections
for businesses and assistance for states
and local governments, lowering the
James Politi — Washington price tag of the package from $908bn.
Colby Smith — New York The revised plan yesterday gained the
The Federal Open Market Committee backing of the Center for American
meets this week at an important junc- Progress, a centre-left think-tank that is
ture for the US economy. While the out- influential within the Democratic party,
look for 2021 has improved because of which called it “an important first step
the rollout of the coronavirus vaccine, on the road to recovery”.
the short-term picture has deteriorated “While CAP has repeatedly called for
since monetary policymakers last met a larger, more comprehensive relief bill
due to the worsening pandemic. . . . we believe that the urgency of the
This has created a dilemma for Jay situation calls for immediate action to
Powell, the Fed chair, and other officials. avert what could become a humanitar-
They have consistently said they are ian and economic disaster and imperil
prepared to provide the recovery with distribution of the vaccine,” said Wendy
more monetary support, including by Stachelberg, executive vice-president.
bolstering their asset purchases, if Neera Tanden, the group’s president,
needed. But is now the moment? has been tapped to be the next White
As they meet for the last time in a House budget director by Joe Biden,
tumultuous year, and for their final president-elect, who has also been
gathering before Joe Biden takes office pushing Congress to reach a deal.
as US president, here are four things to On Monday, Dick Durbin, the Illinois
watch. Democrat and Senate minority whip,
backed the agreement, suggesting that
More punch on bond purchases
the party’s leadership, which had held
Since June, in the early months of the out for relief measures of more than
pandemic, the Fed has been buying $2tn, was willing to accept a far smaller
$120bn of US government debt each number. “This package does not include
month — $80bn across Treasuries of all everything I think we need. But it is an
maturities and $40bn of agency mort- honest compromise,” he said.
gage-backed securities — and has said it “We must provide some emergency
would maintain that policy “over the relief for the American people before we
coming months”. Today, it is expected to Officials publish new forecasts today rate rises than they did in September, Dovish stance: governments are reimposing lockdown go home for the holidays,” he added,
make one big change in that regard, and good news on vaccines may well when the median prediction was for no Jay Powell, in measures that are bound to chill eco- calling on Mitch McConnell, the Repub-
extending the timeframe for those debt lead to a rosier overall economic assess- lift-off until at least the end of 2023. Congress this nomic activity. lican Senate majority leader, to call a
purchases by linking them to certain ment — even though the first quarter of This could be tricky for Mr Powell to month, does not Investors are holding out hope that vote on the bill this week.
economic metrics in the recovery. next year will probably be more dire manage from a communications stand- want to create these facilities will be reinstated early In a speech in the Senate on Monday,
But there has been pressure from than expected because of the worsening point, since he has often maintained a any perception next year after Mr Mnuchin hands the Mr McConnell seemed willing to
some investors and economists to do pandemic, since a number of labour very dovish stance, stressing the down- that the Fed sees reins as Treasury secretary to Janet embrace the plan.
more. Against the backdrop of rising market indicators have weakened side risks to the outlook, and does not the end of the Yellen, the former Fed chair, so any sig- “Either 100 senators will be here
Treasury yields and a flood of new long- sharply recently. want to create any perception that the crisis and is nals on this from Mr Powell will be shaking our heads, slinging blame and
er-dated debt issuance by the Treasury If the Fed does see solid macroeco- Fed sees the end of the crisis and is pre- preparing to closely watched. offering excuses about why we still have
department, the Fed may shift the bulk nomic improvement next year, it may paring to tighten. raise rates not been able to make a law . . . [or] we
Nudging Congress on stimulus
of its bond-buying to longer maturities. lead officials to predict earlier interest Reviving the crisis credit facilities Jim Lo Scalzo/EPA-EFE will break for the holidays having sent
Should the Fed hold off on making Mr Powell is probably tired of harangu- another huge dose of relief out the door
this change, some fear that borrowing This week’s meeting is the first since a ing lawmakers on Capitol Hill for more for the people who need it,” he said. “So
Fed balance sheet hovers near all-time highs
costs could begin to creep up for Ameri- rift emerged between the central bank fiscal stimulus, especially since his let’s get this done.”
can companies at a time when the eco- $tn and the Treasury department over the efforts have been in vain so far. But this But opposition to the compromise
nomic recovery has begun to falter. Oth- fate of emergency lending facilities week’s meeting will be his best chance to threatens to derail the bill. Some Repub-
7.5
ers point to the fact that financial condi- announced this year. make the case for why only government licans believe the cost is still too high,
Fed unveils
tions remain extremely accommodative 7.0 Steven Mnuchin, Treasury secretary, spending can plug the holes in the recov- while Bernie Sanders, the Vermont sen-
extra $2.3tn
to argue that a shift is unnecessary. has asked the Fed to return unused ery that are growing by the day, includ- ator who challenged Joe Biden for the
in loans 6.5
A more extreme, but less likely, funds from five such programmes that ing aid to small business, state and local Democratic presidential nomination,
option would be for the Fed to increase 6.0 are set to expire at the end of the month, governments and the unemployed. said any deal must include direct stimu-
the aggregate size of its asset purchases. including two set up to purchase corpo- Pressure from Mr Powell may help lus cheques to those struggling.
5.5
rate debt, five facilities to support small lawmakers close in on a package worth Josh Hawley, a Republican senator
Vaccines and rate rises Fed announces unlimited
5.0 and medium-sized businesses and one somewhere between $748bn and from Missouri, agreed. “I don’t get why
asset purchases
The last forecast from the Fed in Sep- that lends to state and local govern- $908bn but an additional question for so-called ‘emergency relief’ packages
4.5
tember suggested the US economy ments. the central bank chief is whether for #COVID19 don’t include direct
would contract by 3.7 per cent in 2020, 4.0 Mr Powell has repeatedly signalled his he thinks the economy will need assistance to working families. Working
followed by a 4 per cent rebound next preference to keep these facilities far more in the new year, as Mr Biden is people waiting in food lines & unable to
Jan 2020 Dec
year and the unemployment rate drop- active, especially in light of the fact that calling for. make rent is not an emergency?” he
Source: Federal Reserve
ping to 5.5 per cent by the end of 2021. coronavirus case counts are surging and See Markets Insight wrote on Twitter yesterday.
Low-carbon transition Eurozone
US central bank joins alliance to back Paris climate goals ECB gives green light for
banks to restart dividends
Martin Arnold — Frankfurt deepening our discussions with potential action identified by most of completed next year. Environmental
our NGFS colleagues from around the respondents was “the risk of creat- campaigners have accused the ECB of
The US Federal Reserve has joined a
the world,” Jay Powell, the Fed chair, ing financial distortions”. reinforcing the market’s bias in favour
consortium of central bankers sup-
said. Clemens Fuest, head of the Ifo Insti- of heavy carbon-emitters, such as oil Martin Arnold — Frankfurt adverse developments”, it will return to
porting the Paris climate goals as it
According to the survey, only a small tute in Munich, said it would be “very and gas companies, utilities and air- its normal supervisory assessment of
becomes more outspoken on the risk Banks in the eurozone will be able to
minority of central banks have dis- bad economic policy to use this as the lines, because these sectors issue more banks’ capital and dividend plans.
climate change poses to the global pay modest dividends to shareholders
cussed implementing operational basis for steering capital flows in an bonds than most others. The move leaves eurozone banks
economy. again from the start of next year under
changes to tackle climate change, economy”, adding that it would be tan- Ms Lagarde has said central bankers more constrained on dividend pay-
strict limits outlined by Europe’s finan-
The Network for Greening the Financial despite warning of the impact it will tamount to “a centrally planned econ- should “ask themselves” if they are ments than their UK rivals after the
cial regulator yesterday.
System, which published yesterday a have on economies. omy”. taking “excessive risk” by trusting Bank of England last week said it would
survey of its members’ plans for con- The question of whether central Most of the central banks surveyed by investors to price environmental The European Central Bank’s supervi- allow the strongest banks to pay divi-
fronting climate change, said the Fed banks should use their vast bond-buy- the NGFS said there needed to be better issues. She said the ECB would consider sory board recommended that banks dends of up to a quarter of the past two
was one of eight new members to join ing programmes to fight climate change disclosure of climate risks by commer- ditching the “market neutrality” distribute up to 15 per cent of their past years’ profits, or 0.2 per cent of risk-
the group this month. by selling the bonds of the heaviest car- cial lenders and bond issuers as well as principle that means it always buys two years of profits to shareholders and weighted assets.
“As we develop our understanding bon emitters and buying more green more international co-ordination bonds in proportion to the overall no higher than 0.2 per cent of their com- The ECB ordered eurozone banks to
of how best to assess the impact of cli- bonds is one of the most contentious before they could take action in this market. mon equity tier one capital. stop all dividends and share buybacks to
mate change on the financial system, areas of monetary policy. area. However, this was rejected by Jens Banks should only restart dividend conserve €30bn of capital in March,
we look forward to continuing and Only seven respondents to the NGFS “The vast majority of central banks Weidmann, head of Germany’s central payments if they are profitable and have shortly after the pandemic arrived in
survey said they were “not currently participating in our survey see scope for bank and a member of the ECB govern- “robust capital trajectories” that can Europe. Since then, the sector has lob-
considering taking climate-related adjusting their operational frameworks ing council, who wrote in the Financial withstand the impact of the coronavirus bied hard for stronger banks to be
measures”. Most of those considering to reflect climate-related risks,” said Times last month that “it is not up to us pandemic, the central bank said. allowed to resume payouts early next
action said it was aimed at “mitigation Sabine Mauderer, a Bundesbank execu- to correct market distortions and politi- The ECB, which oversees the 113 big- year.
of financial risks stemming from expo- tive who oversaw the NGFS survey. cal actions or omissions”. gest lenders in the eurozone, also reiter- Some officials have argued that the
sures to climate-related risks on their “Though central banks are clearly sensi- Mr Weidmann added that the ECB ated its guidance for bank bosses to sector should continue to conserve capi-
balance sheets”. tive to climate risks, the implementa- “should consider only purchasing secu- exercise “extreme moderation” on tal ahead of a potential surge in defaults
But when asked if they had consid- tion of specific measures is still at an rities or accepting them as collateral for bonus payments by scrapping, defer- that is likely when governments wind
ered implementing measures to protect early stage.” monetary policy purposes if their issu- ring or converting into shares as many down their loan guarantees and other
themselves from climate risk or to Christine Lagarde, the European Cen- ers meet certain climate-related report- of their payouts as possible. policies to shield the economy from the
proactively support the transition to a tral Bank president, has promised to ing obligations”, as well as only using The new guidelines will last until the pandemic. The ECB has warned that in a
low-carbon economy, more than half make tackling climate change a key part credit ratings that incorporate climate end of September 2021, the ECB said, at severe scenario, eurozone banks could
said they had not. The main obstacle to of its strategy review, which is due to be risks. which point, barring “materially be hit by €1.4tn of bad loans.
DECEMBER 16 2020 Section:World Time: 15/12/2020 - 18:51 User: sanjay.gohil Page Name: WORLD3 USA, Part,Page,Edition: USA, 4, 1
Wednesday 16 December 2020 ★ FINANCIAL TIMES 5
y
Mohamed El-Erian Central banks’ distortion of markets will be harder to defend in a recovering economy
MARKETS INSIGHT
Buyout activity
Credit Suisse
Wing and a prayer Airlines fear big fines for
tightens focus
breaking EU data rules without Brexit deal
at risk after US
on wealth
management
court ruling on
Owen Walker and Oliver Ralph
London
‘reckless’ board Thomas Gottstein, Credit Suisse chief
executive, has put managing the for-
tunes of the world’s wealthiest at the
heart of the bank’s strategy as he tries
to draw a line under a testing first 10
months in the job.
The Swiss bank said yesterday that it
planned to increase profits from its
wealth management business by at least
3 Nine West creditors cleared to sue
a quarter by 2023 through initiatives
that would cost up to SFr150m ($169m).
3 Chain failed after leveraged deal
In a strategy update to investors, Mr
Gottstein, who took the job in February
following the messy exit of his predeces-
Sujeet Indap — New York “Even a trial and ‘vindication on the sor, Tidjane Thiam, outlined his main
facts’ will still leave this preliminary rul- areas of focus for the next three years.
Deal lawyers in the US are warning that ing out there stating that a board acts Alongside wealth management, they
leveraged buyouts could become much ‘recklessly’ by failing to adequately include building up the trading and
more difficult to do after a court said assess an LBO-buyer’s post-transaction investment banking business and
creditors could go after a company’s solvency,” he said. achieving a return on tangible equity of
former directors if a private equity Ropes & Gray found the ruling so con- 10 to 12 per cent.
buyer saddled the business with an sequential that it put out a bulletin to Next year “is the new era for Credit
unsustainable amount of debt. clients last week. The ruling’s “direction Suisse where we want to go into offense
A recent ruling — in the case of the to corporate decision makers is seem- and we want to grow”, Mr Gottstein told
bankruptcy of retailer Nine West — by ingly at odds with their concurrent duty the Financial Times. “This has to be all
Judge Jed Rakoff of the Southern District to maximise value for corporate stake- done with discipline across risk, compli-
of New York said creditors could pursue holders — typically satisfied by obtain- ance and cost.”
misconduct charges against the ing the highest possible price from a The 56-year-old has had a gruelling
previous board of directors, which putative buyer”, the law firm wrote. introduction, taking over just as the
approved a $2bn leveraged buyout to The Nine West bankruptcy has been pandemic gathered pace. Several of the
Sycamore Partners in 2014. The busi- contentious, with its private equity fires he has been forced to fight relate to
owner facing accusations of asset-strip- the period before he became chief, nota-
‘Requiring boards to be ping. As part of the 2014 buyout, it sold bly the corporate spying debacle that
two of the company’s top brands, Stuart Unhappy landing: carriers face a dilemma on handling passenger data if talks on a trade deal fail led to the departure of Mr Thiam.
liable for the results years — Tolga Akmen/AFP/Getty
Weitzman and Kurt Geiger, to a Syca- At the height of the pandemic in the
after a sale . . . could more affiliate in a side deal at what cred- Philip Georgiadis Airlines say the transfer of data to the statement, the Home Office said it spring, Credit Suisse was caught up in
itors later argued was too low a price, UK will no longer conform to Europe’s had a “well-rehearsed plan” in place. scandals at Luckin Coffee and Wirecard,
be a game-stopper’ Airlines are warning they face large
leaving the remaining Nine West brands General Data Protection Regulations “Provision of passenger lists of the having worked on deals for both. It also
fines for breaking strict European
unable to shoulder the LBO debt. for personal data unless a legal names of passengers and the details of launched an internal review over its
rules on the exchange of passenger
ness went bankrupt four years later. Junior creditors argued the Nine West arrangement can be reached. their travel documents is unaffected supply chain finance funds linked to
data for flights to the UK from next
The board had been “reckless” in fail- board had been told by investment This means airlines could be fined by the ending of the transition period. SoftBank and Greensill Capital.
month should trade talks with the
ing to assess how the LBO debt could bankers that the company could only under the EU’s GDPR data privacy UK border control and law enforce- With Swiss regulators giving banks
EU collapse.
leave the new company insolvent, the withstand a debt to cash flow ratio of 5.1 provisions if they pass on the passen- ment agencies will continue to know permission to resume dividends, Credit
judge wrote in the December 4 ruling. times, but the Sycamore LBO they Their concerns centre on the ger information. European Commis- who’s expected to be on planes Suisse said yesterday it would increase
“Requiring boards to be liable for the approved raised leverage to 7.8 times. omission of how passenger data sion fines can rise as high as €20m, or intending to fly to or from the UK,” the its dividend by 5 per cent per year and
results years after a sale would put The board argued that it had not should be handled in EU contingency 4 per cent of a company’s turnover. Home Office said. restart a SFr1.5bn share buyback plan.
board members in a position of conflict opined on the propriety of the side deal plans to keep planes flying in the Airlines could face fines of up to Grant Shapps, the UK transport sec- Its investment bank had performed
between what is best for shareholders in and LBO financing. The court, however, event of a no-deal Brexit, according to £10,000 per flight for refusing to hand retary, has said that Britain will recip- well in the fourth quarter, it said, with
the short run versus what is best for said all components of the transaction two people familiar with the matter. over data to UK authorities. rocate EU emergency plans to ensure revenues expected to be higher than in
directors over the next few years follow- should have been considered. Airlines are in talks with the UK The UK Home Office had reassured road and rail connectivity can con- the same period a year earlier.
ing a transaction,” said Brian Quinn, a Since the board had been “reckless” government on personal data trans- airlines it was looking at a worka- tinue after December 31. Airlines Mr Gottstein also insisted asset man-
corporate law professor at Boston Col- in not investigating Nine West’s sol- fers when the UK’s EU transition round to help them find a way to com- would be able to fly their normal agement was still a priority, adding that
lege. “It could be a game-stopper for the vency, it “cannot take cover behind the period runs out at the end of this ply with data rules, one of the people routes for six months. the bank had a “clear plan to go back to
private equity business.” business judgment rule”, Judge Rakoff month, these people said. familiar with the matter said. Airlines have urged Mr Shapps to significant growth” in the business.
The ruling is preliminary and the situ- wrote, referring to the legal doctrine Personal data, including names, Ministers are planning to reach data publish the UK’s response to the pro- But the bank stressed fourth-quarter
ation will now be resolved in a trial or a that keeps directors’ past actions from means of payment and travel itinerar- transfer agreements with individual posals as soon as possible “to provide results would be marred by a $450m
settlement, but the judge’s statement of being second-guessed later. ies, is collected for each passenger airlines. This would enable informa- the industry with confidence for a writedown on its holding in York Capital
legal theory could have long-lasting con- Lawyers for the Nine West direc- travelling between the EU and UK. tion sharing to continue if there was a potential no-deal scenario”. Management, the US investment group
sequences, said Ryan Preston Dahl, a tors did not respond to a request for This is passed to British authorities to no-deal Brexit, a person familiar with The commission did not respond to that said it was winding down its Euro-
partner at Ropes & Gray. comment. counter terrorism and serious crime. the government’s thinking said. In a request for comment. pean hedge fund business last month.
New Panasonic chief must add a dash of boldness to revive group
executive Yuki Kusumi said last month Tsuga hopes to break the deadlock by
inside business
that the group could achieve growth if it changing the company into a holding
could find businesses that excelled company structure, echoing a move
asia
among its diverse portfolio, which Sony will also make in April. Panasonic
stretches across 520 subsidiaries. But he says the shift, to be completed by 2022,
Kana stopped short of naming where those will help to accelerate decision-making
strengths were and neglected to feature by running the units independently.
Inagaki the automotive division he is running. Analysts hope that spinning off divi-
Mr Tsuga’s decision to partner with sions will make it easier to sell under-
the mercurial Tesla chief executive Elon performing businesses.
Musk required courage. Still, a century- But there is a critical difference
old behemoth with a focus on steady between the two historic rivals. Follow-
E ight years ago when Kazuhiro profits was bound to clash with the ing its own decade of soul-searching and
Tsuga took over as chief exec- brash ambitions of the US electric car restructuring, Sony has a clear picture
utive of Panasonic, he maker. Those tensions manifested of what forms its core — to become a
claimed his first mission was themselves as Panasonic decided supplier of global content in games,
to return one of Japan’s great- against investing in Tesla’s new gigafac- films, animation and music. Since Ken-
est consumer brands to a profitable tory in China. ichiro Yoshida took over as chief execu-
“normal company”. Six years after a landmark deal for tive in February 2018, Sony’s share price
He stemmed a record loss by pulling Panasonic’s $1.6bn investment in the has increased 78 per cent while Pana-
out of plasma television and aimed to Nevada gigafactory, Tesla’s battery busi- sonic’s has plunged 30 per cent.
reposition the company as an automo- ness is finally close In announcing the shift to a holding
tive-and-housing conglomerate. At the to turning an Analysts hope that company, Mr Tsuga resurrected car bat-
core of that transition was a bold $5bn annual profit, and teries as a “core” by rebranding it as an
spinning off divisions
battery manufacturing tie-up with elec- it will benefit from “energy business”. The three other cores
tric vehicle maker Tesla signed in 2014. the global push will make it easier to sell remain a muddled mix of appliances,
But as Mr Tsuga prepares to step towards electric industrial devices and a sprawling busi-
underperforming
down next June, his promise of a “nor- vehicles. ness based on connecting electronics.
mal company” is leaving a bitter after- But Panasonic’s businesses When Mr Kusumi takes over, Pana-
taste. For a group that prides itself on bumpy relation- sonic will be in a much stronger finan-
innovation, the blandness of the pledge ship with Tesla is a window into the cial position than when Mr Tsuga was
underscored the crisis it had fallen into. broader challenge faced by the biggest appointed. Even as Tesla begins manu-
In the past few years, Japanese con- players in the batteries manufacturing facturing battery cells in-house, Pana-
glomerates from Sony and Hitachi to industry. Battery making is a low-mar- sonic is bullish the carmaker will still
Toshiba have gone on huge divestment gin business where pressure for cost need its technology knowhow and man-
sprees as shareholder activism and cuts is immense and significant invest- ufacturing capability.
demands for better governance stand- ments in research are required. But the 55-year-old Panasonic lifer
ards pressured companies to have a Despite being a champion for Pana- will be inheriting a company that
sharper focus on what parts were criti- sonic’s tie-up with Tesla, Mr Tsuga remains too big to inspire confidence
cal to their business portfolio. wavered when it came to declaring it as that it can move quickly to keep its lead
Panasonic followed a similar path, but a core business because of the losses it in the global battery race with Chinese
even after years of streamlining, execu- was generating. For investors, it was and South Korean rivals. It will have to
tives continue to grasp for words to equally frustrating that the manage- continue delivering profits, but a taste of
define what kind of a company it is after ment also failed to provide a convincing Tesla-like boldness may be needed to
Mr Tsuga failed to deliver on aspirations explanation of what other businesses revive the group.
to focus on automotive and housing would be central to its expansion.
operations. Its newly appointed chief As his final departing measure, Mr [email protected]
DECEMBER 16 2020 Section:Companies Time: 15/12/2020 - 18:38 User: jeremy.wright Page Name: Comps&Mkts1, Part,Page,Edition: ASI, 5, 1
6 ★ FINANCIAL TIMES Wednesday 16 December 2020
COMPANIES & MARKETS
Banks Support services
Barclays fined over customers’ arrears Outsourcer
Solutions 30
plunges after
‘Poor treatment’ of Mark Steward, executive director of arrangement at the expense of a “prior- and charges applied during the period. The regulator said that “on multiple Muddy Waters
enforcement and market oversight at ity debt” such as mortgage, council tax, The FCA monitored this programme. occasions, Mr Abbattista placed large
struggling borrowers
the Financial Conduct Authority, child support payment or utility bill. Barclays has since proactively paid misleading orders for contracts for dif- joins attack
leads to £26m penalty said: “Consumers should feel reassured But some Barclays customers who fell out more than £273m in redress to at ference referenced to equities, which he
that their lender will work with them to behind on loan or card payments or least 1.5m customer accounts. did not intend to execute” — a practice
help resolve any financial difficulties, went over their agreed borrowing limits Barclays said: “Since the issue was known as “spoofing”.
Matthew Vincent
whereas Barclays’ poor treatment of its were not always contacted or treated in first identified, we have implemented a Mr Abbattista’s legal representatives
Barclays has been hit with a £26m fine customers risked making these difficul- the right way. In some cases, they were number of changes to our customer did not immediately respond to Jamie Powell — London
for its treatment of borrowers who fell ties worse.” not offered suitable options in their cir- journeys, systems, processes and col- requests for comment. David Keohane — Wicklow
into arrears or experienced financial Under the FCA’s rules, banks and cumstances, such as a reduction of league training to correct it.” Nick Bayley, head of UK regulatory Shares in Paris-listed outsourcing
difficulties over a four-year period. credit card issuers are required to take interest or cancellation of charges. In a separate enforcement action yes- consulting at Duff & Phelps, suggested group Solutions 30 plunged almost 40
The UK regulator said that between steps to ensure they properly under- According to the regulator, Barclays terday, the FCA said it had fined the further similar enforcement actions per cent yesterday after high-profile
April 2014 and December 2018, the stand any customer’s financial difficul- identified some of the problems with its former chief investment officer of hedge could follow. “This is the FCA’s very first short-seller Muddy Waters joined in
lender had failed to follow the right pro- ties. They are expected to show forbear- procedures as early as 2014, but due to fund Fenician Capital Manage- market abuse outcome under the EU criticism of a company that has been
cedures for contacting customers who ance and “due consideration” to cus- failings in its internal systems and con- ment £100,000 for market abuse. Cor- Market Abuse Regulation, which went assailed by an anonymous report.
fell behind on loan repayments, and had tomers who have fallen into arrears or trols, they were not fully rectified. rado Abbattista was handed the penalty live in July 2016. We can see from its
not had “appropriate conversations” are struggling to make repayments. Subsequently, the lender contacted and prohibited from carrying out regu- annual report that the regulator had 29 The Luxembourg-based group was tar-
with them. The conduct caused it to The rules are designed to prevent any all customers to apologise for their lated activities for “creating a false and market manipulation cases open as at 31 geted last week by an anonymously
offer them “unaffordable, or unsustain- customer under pressure from making treatment and confirm that it would misleading impression as to the supply March this year, so hopefully other out- published report, which was sent to
able, forbearance solutions”. payments under a consumer credit refund them the relevant interest, fees and demand for equities” in 2017. comes will follow quickly in its wake.” equity analysts as well as market regula-
tors, including France’s AMF. Carson
Block, founder of Muddy Waters, began
publicly criticising the company’s cor-
Technology. Digital diagnostics porate governance last Friday.
Solutions 30 has been accused of
questionable transactions with an Ital-
China’s online medical platforms take off
ian accountant, who was described by
the anonymous report as “a known
mafia associate”. The report also raised
doubts about the €1bn company’s com-
plex structure, related party dealings
and what it labelled its “impossible to
Lockdowns and gaps in health reconcile” accounts.
Solutions 30 suspended its shares
coverage drive remote drug
before the market opened on Friday.
sales and patient consultations After trading resumed yesterday, the
stock tumbled 38 per cent in Paris.
The author of the report, who noted
Christian Shepherd — Beijing that they remained anonymous because
Chinese technology groups are vying to of the nature of the allegations, said the
lead the country’s fledgling online situation “uncovered from analysing
healthcare sector after the coronavirus public records . . . warrants immediate
pandemic boosted demand for plat- investigation by authorities”.
forms that provide virtual consultations The main accusations centre on Solu-
and sell medicines. tions 30’s relationship with Angelo Zito,
Following a decade of tepid uptake for a Bari-born accountant who, according
online pharmacies and consultations, to local reports, did time in prison for his
Covid-19 has prompted a clamour for links to the Sicilian mafia in 2000.
remote healthcare services by patients Solutions 30 has admitted in its
afraid to visit hospitals and investors responses to using Mr Zito’s services
keen to tap into the expanding sector. when it redomiciled to Luxembourg in
Digital alternatives could also poten- 2013, including the purchase of shell
tially fill longstanding gaps in China’s companies formed by Mr Zito’s com-
healthcare coverage, where the best pany which it described as “normal
doctors and equipment are concen- market practice” to avoid “bureaucratic
trated in top-tier hospitals in big cities. delays”. The company said it cut ties
The growing interest in the industry with Mr Zito in 2016 after finding out
was underscored last week when shares about his “controversial past”.
in JD Health rose as much as 75 per cent Mr Zito defended himself in an inter-
on their debut. The healthcare unit of view this week with Zone Bourse, a
ecommerce group JD.com earlier raised French website, saying that the accusa-
$3.5bn in Hong Kong’s biggest initial tions against him were being used to put
public offering of 2020. a “black mark on all of Solutions 30”.
Shares in AliHealth, the Hong Kong- He said while he had been accused of
listed healthcare division of rival inter- money laundering by the report, “the
net business Alibaba, are also up more Italian justice system sentenced me for
than 170 per cent this year. links to the mafia, so nothing to do with
“What Covid-19 did in many ways was money laundering.” He also down-
to create a mass trial for a service that played the links, saying they stemmed
people have not tried before,” said JD Health, led by long-term growth for China’s online minor or chronic illnesses”, Mr Xin said. ‘What The boom in China’s online health- from a passing contact with a lawyer
Vikram Kapur, head of healthcare at chief executive healthcare sector would come from its But there are significant barriers to care industry has led to a proliferation who worked for the mafia: “All it takes is
Covid-19
consultancy Bain Asia Pacific. Xin Lijun, ability to resolve longstanding problems growth in the industry, including of providers, but only those with scale a handshake, it just takes a phone call, it
Even as China has returned to relative below, offers in the distribution of high-quality patients’ ability to make claims for did in many and brand recognition are likely to sur- just takes a simple contact.”
normality after controlling coronavirus access to highly healthcare across the country. online medical services through vive, said Kitty Lee, head of Oliver Mr Block sent the second of two open
ways was to
with some of the strictest lockdowns, trained doctors JD Health works with local communi- employer-provided insurance schemes. Wyman’s health and life science prac- letters yesterday, asking for Solutions
use of online healthcare platforms has that are often ties to offer access to highly trained doc- China launched an online medical create a tice in Asia Pacific. 30 to comment on how certain state-
remained about 60 per cent to 70 per unavailable at tors who are frequently unavailable at insurance system in August last year, Analysts said JD Health and AliHealth ments made by Mr Zito compared with
mass trial
cent of that in the early stages of the out- small clinics small clinics. The service also helps pre- but only a handful of cities and prov- also had an advantage in selling over- declarations made by the company.
— Roy
break, Mr Kapur added. Liu/Bloomberg vent large public hospitals from being inces, including Beijing and Shanghai, for a service the-counter drugs and prescriptions Muddy Waters has been betting against
Ping An Good Doctor, a unit of China’s overwhelmed by “ordinary people with have formally implemented it. thanks to their underlying ecommerce Solutions 30’s stock since May 2019, but
that people
largest insurer Ping An, had 67.3m Mr Xin said the national rollout of the platforms, which will take up a large in a break from its normal practice, had
monthly active users as of June and was public reimbursement system for have not portion of revenue growth in coming not disclosed why until last week.
hosting an average of 831,000 consulta- online healthcare would probably take years as rates of chronic diseases rise. Solutions 30 has rebutted the charges
tried before’
tions every day. That made it China’s two to three years. Companies may also have to contend levelled by the report and Mr Block’s
most popular online healthcare pro- There are more than 300 local gov- with a shifting regulatory environment. first letter, saying in a statement on
vider in terms of users, outpacing JD ernment departments across the coun- Ms Lee said the policy framework China Monday that it had been targeted by a
Health and AliHealth. try that are responsible for managing was building had yet fully to account for “destabilisation campaign” using “mali-
Online drug sales, meanwhile, could health insurance, and JD Health has to all the risks arising from the sector’s cious and disloyal methods”.
reach Rmb516bn ($78.9bn), or 15 per speak with each of them to work out growth, including challenges in stand- Solutions 30 has appointed law firm
cent of China’s total by 2025, according how to manage claims for online consul- ardising care and products across the August Debouzy to file a complaint with
to estimates by Citi. That figure is up tations or prescriptions. “Some local country. “There remain a lot of uncon- the PNF, France’s specialist financial
from 6 per cent in 2018. governments’ finances are ample and nected dots,” she said. crimes unit, against an unnamed indi-
Xin Lijun, chief executive of JD some are in short supply, so they will be Additional reporting by Wang Xueqiao in vidual “for dissemination of false and
Health, told the Financial Times that more cautious,” Mr Xin added. Shanghai misleading information”.
Retail Travel & leisure
Inditex cuts inventory and costs as sales revive Cleveland baseball team to drop ‘Indians’ name
Daniel Dombey — Madrid loss of €409m for the February-April and 88 per cent were subject to curbs. Sara Germano — New York The move follows a decision this sum- intensified attention to race relations.
period. “It’s not been an easy challenge for Indi- mer by the American football franchise Both sports teams had previously
Inditex, the biggest clothing retailer, The Major League Baseball franchise in
Pablo Isla, executive chairman, said: tex — people haven’t been so focused on in the US capital to rebrand as the Wash- faced scrutiny for their use of native ter-
cut inventory and operating costs in Cleveland, Ohio intends to drop its
“These results are the direct conse- fashion in a year most of us have mostly ington Football Team. That organisa- minology for their mascots, but Wash-
the third quarter as sales rebounded to team name of more than a century,
quence of effective management in spent at home,” said Anne Critchlow, tion bowed to years of pressure to give ington owner Dan Snyder had once defi-
close to the levels of a year ago, despite making it the second American profes-
every area of the company and the abil- analyst at Société Générale. up its moniker, the Redskins, widely antly declared that he would “never”
the effects of the pandemic and the sional sports team this year to change
ity to react and adapt in an unpredicta- “But they have managed to keep up considered a racial slur. change course.
impact of working from home on the insignia perceived as racially insensi-
ble environment.” sales, because their short lead time for The shift away from ethnic mascots Cleveland’s baseball franchise has
industry. tive by indigenous groups.
The group expected inventories to products allows them to adjust their underscores the magnitude of social been known as the Indians since 1915.
In results published yesterday, the grow less than sales, largely because of offering to more comfortable clothes, In a statement, the team said it would change within the US, where the police About three years ago, it abandoned use
Spanish group, known for its Zara chain, and the fact they use stores for stock continue using the Indians name until killings of George Floyd and Breonna of a polarising logo — which depicted a
posted sales of €6.05bn in the three Online sales increased helps them keep customers supplied.” the organisation was able to finalise a Taylor this year prompted renewed and cartoonish indigenous chief — on uni-
months to the end of October, a 14 per The company said it would resume its new moniker, a timetable for which has forms and in-stadium signage, following
75% in the nine months
cent fall on the same period a year ago. normal dividend policy for the full year not been established. pressure from Rob Manfred, MLB com-
Net income dropped 26 per cent to to October compared with of 2020. But it acknowledged the latest Paul Dolan, the Cleveland team’s missioner, who called it “no longer
€866m, though the decline was 13 per restrictions and closures that began in owner, said the franchise consulted with appropriate”.
the same period last year
cent when currency fluctuations were mid-October. Several countries have local indigenous groups regarding its Formally rebranding a professional
excluded. toughened such curbs in recent days. decision. sports franchise can take years and cost
The company said it had cut its inven- employment of technology and stock Ms Critchlow said: “One problem they “Hearing first-hand the stories and millions of dollars after taking into
tory 11 per cent and operating expenses management, including using stores to have had that’s a little hidden by the pri- experiences of Native American people, account intellectual property, mer-
10 per cent in the quarter. help satisfy online demand. mary effects of the pandemic is cur- we gained a deep understanding of how chandise and outfitting expenses and
Sales, which in August were 87 per The virus crisis has accelerated the rency. The weakness of currencies in tribal communities feel about the team the securing of approval from league
cent of their level in the same month group’s digital shift, with online sales up emerging markets, where much of their name and the detrimental effects it has officials.
last year in constant currency terms, 75 per cent in the nine months to Octo- growth strategy is focused, took 4 per on them,” he said. The capital’s football franchise began
had reached 94 per cent by October. ber compared with the same period last cent off sales and 13 per cent off profits News of the expected name change its 2020 season under the name the
In April, the corresponding figure year. By contrast, 5 per cent of its stores in the third quarter.” was first reported by The New York Owner Paul Dolan says the franchise Washington Football Team as it evalu-
was 28 per cent, contributing to a net remained closed in the third quarter See Lex Times. consulted with indigenous groups ated its options.
DECEMBER 16 2020 Section:Companies Time: 15/12/2020 - 18:50 User: timothy.digby Page Name: CONEWS1, Part,Page,Edition: ASI, 6, 1
Wednesday 16 December 2020 ★ FINANCIAL TIMES 7
DECEMBER 16 2020 Section:Ad Page Time: 15/12/2020 - 10:44 User: william.baxter Page Name: AD VALE, Part,Page,Edition: USA, 7, 1
8 ★ FINANCIAL TIMES Wednesday 16 December 2020
COMPANIES & MARKETS
Spanish blue-chips jostle for Brussels aid cash
Seat, Telefónica and Iberdrola lay out grand ambitions as they plot projects qualifying for share of €750bn pot
Volkswagen unit Seat has called for
Daniel Dombey — Madrid
EU co-financing of projects to roll
Spanish blue-chips including Tele- out electric charging points and
fónica, Iberdrola and Seat are position- provide infrastructure for fully
ing themselves for tens of billions of wired factories
— Angel Garcia/Bloomberg
euros in EU coronavirus aid they hope
will transform their industries and ben-
efit their bottom lines.
Spain expects to receive some €140bn
from the €750bn EU coronavirus recov- access to high-speed internet would
ery fund, which leaders approved last encourage companies to locate opera-
week, making Madrid one of the biggest tions throughout the country. “If we are
beneficiaries of the programme, along able to take broadband to 100 per cent
with countries such as Croatia, Bulgaria, of our national territory, the possibili-
Greece, Portugal, and Romania. ties are almost endless.”
Spanish companies have been draw- She emphasised that modernising
ing up proposals for projects co-fi- Spain’s large cohort of small and medi-
nanced by the aid, which will prioritise um-sized enterprises was a big priority
clean energy and digitalisation, in antic- for the recovery fund.
ipation of a once-in-a generation trans- But this was also likely to involve big-
fer of resources. ger groups.
However, as companies across Europe For example, Telefónica said its retail
explore the potential benefits of the outlets could be used to help give train-
huge injection of public funds, some
officials warn against excessive opti- ‘We have to be prudent
mism about the aid’s effectiveness.
and avoid an excess of
According to draft Spanish govern-
ment legislation on the management of optimism. We have to learn
the funds, the industry ministry will
from the errors of the past’
compile a registry of interested compa-
nies, which will have preferential con-
sideration for carrying out projects,
receiving subsidies or forming part of ing for SMEs to migrate procedures and
consortiums. services online, and suggested that its
experience of running a large-scale
‘This is a unique chance. Where Madrid intends to spend €72bn Spain’s economy strains to keep up Sales slide at Iberdrola and Telefónica “reskilling programme” could help
identify the training deficit for the Span-
We have to make a bold of EU grants in 2021-23* GDP at constant prices, annual % change Sales, rolling 12 months (€bn) ish population.
By sector (%)
effort to identify sectors But Ms Herrero said the government’s
Resilient infrastructure 10 Iberdrola Telefónica plans to attract “co-investors” from the
and ecosystems 12.2
with the best prospects’ 60
private sector were a departure from
Education Urban and
17.6 rural 0 “traditional procedures in which the
As it makes its case to be on the list, development government designs projects and com-
16.0 Spain
Telefónica has proposed that EU funds Industrial, SMEs 40 panies carry them out”.
be used to help make Spain the first amnodd teorunrisisamtion EU27 ex UK -10 As a result, it was all the more impor-
country in the bloc with 100 per cent 17.1 Energy tant to provide sober evaluations of risk
transition Promotion
fibre optic coverage — by 2025, at the Science, innovation 8.9 of culture 20 and probable demand, and to ensure
cost of about €4bn. Current coverage is and health and sport -20 that projects were assessed by an inde-
75 per cent. 16.5 1.1 Period of extended pendent agency.
The operator said the aid could also emNepwlo ycmareen etc poonloicmieys a5n.7d Administration 5.0 underperformance “Experience shows that we have to be
-30 0
help roll out a standalone 5G network prudent and avoid an excess of opti-
covering 85 per cent of the country. *a nPde rRcEenAtCaTg-eEsU include funds from both the Recovery and Resilience Facility 2001 05 10 15 20 2016 17 18 19 20 mism,” she said. “We have to learn from
“Spain could become the digital Hea- Sources: Government of Spain; Refinitiv; FactSet the errors of the past.”
throw of Europe, the destination for the
cables that come to Europe from the US,
Latin America, from Asia, wherever,” incentives would accelerate electrifica- a contraction in GDP of more than
José María Álvarez-Pallete, Telefónica tion of energy-intensive industries. 11 cent this year.
chairman and chief executive, said. He said that public funds would Cristina Herrero, president of the
“We can offer an ecosystem for Nokia, allow Iberdrola to complete a €1.8bn Independent Authority for Fiscal
Huawei, Ericsson, Samsung and the tens project to use hydrogen to make Responsibility, the country’s fiscal
of others that could come.” fertiliser “much before” its current 2027 watchdog, said private sector expertise
Iberdrola is similarly expansive in its target date, as well as to accelerate could play a vital role given the
ambitions and effusive about the fund. another project to manufacture large- “demanding” timelines involved.
The €71bn company suggests that aid scale equipment to extract hydrogen But she warned that previous national
be used to quicken the country’s push to from water. and EU plans had “crowded out” private
drive down carbon emissions by invest- “These are concrete projects that will investment by providing incentives for
ing in electricity storage, “clean hydro- need public support to be carried out.” projects that would have been carried
gen”, the replacement of domestic gas Seat, the wholly-owned Volkswagen out in any case.
burning boilers and the installation of subsidiary, has also called for EU co-fi- She argued that in areas such as digi-
electric car charging points on the coun- nancing of projects to roll out electric talisation and training, Spain lagged
try’s motorway network — the most charging points and provide infrastruc- behind other European economies “by
extensive in the EU. ture for fully wired factories. so much that we cannot hope that the
“This is a magnificent opportunity to “This is a unique chance for Spain,” EU plan alone will be enough”.
transform our productive model into a said Josep Maria Recasens, Seat’s direc- Nevertheless, the government is hop-
more sustainable and competitive one,” tor of strategy. “We have to make a bold ing the public-private collaboration will
Ignacio Galán, chairman and chief exec- effort to identify the sectors with the have a big multiplier effect.
utive, said. best prospects . . . so they can be trans- “According to analysts, each euro of
While emphasising that his multina- formed through the intelligent use of public money invested could bring
tional group had already promised to these funds.” another four euros [from private invest-
invest €75bn over the next five years, The government of Pedro Sánchez, ment],” María Jesús Montero, budget
Mr Galán argued that some green prime minister, wants to begin minister, said. “That’s the ratio that is
priorities still needed aid to become EU-funded projects as soon as possible expected from this investment.”
more economically viable, and that to overcome what it expects to be Ms Montero argued that universal
Retail
GBL takes control of Canyon Bicycles
Olaf Storbeck — Frankfurt company, pushing its growth rate to 30 details said that private equity bidders
Kaye Wiggins — London per cent this year. Canyon founder were offering a higher price but that Mr
Adidas’s largest shareholder Groupe Roman Arnold recently told German Arnold, who has so far been Canyon’s
Bruxelles Lambert is banking that the magazine Focus that demand has been controlling shareholder, preferred GBL
global cycling boom will continue by so strong that “50 per cent [growth] had because of its long-term investment
taking a controlling stake in fast-grow- been possible”, but adding that growth perspective of a decade or more.
ing premium brand Canyon Bicycles. rate would have overwhelmed the com- Mr Arnold said that the new investor
pany. convinced “with [its] passion for our
The Brussels-based holding company, GBL pre-empted potential offers from business, years of experience and long-
which is backed by Belgium’s Frère and private equity groups including KKR term focus”.
Canada’s Desmarais families, will take a and Carlyle Group, people familiar with Canyon, which has traditionally con-
60 per cent stake in privately held Can- the deal said. centrated on road and mountain bikes,
yon, it said yesterday. The deal values “I’m completely surprised,” said one recently extended its fleet to urban
the German-based company at about person who advised private equity suit- bikes designed for day-to-day use in cit-
€800m including debt, according to ors. “I didn’t have the GBL guys on my ies as it aims to lift sales to €1bn in the
people familiar with the transaction. radar. I didn’t know they did this kind of coming years.
Former Apple executive Tony Fadell transaction.” Two people briefed on the The company is also extending its
— who is one of the people credited with fleet of electric bikes and in September
inventing the iPod — is also co-investing unveiled a concept study of a four-
into the German brand alongside GBL. wheeled vehicle that is a mixture of an
Mr Fadell, an avid cyclist, will join the electric car and bike, which it touted as a
company's advisory board. “revolutionary alternative to both the
The manufacturer, which sells road automobile and the bicycle”.
bikes for as much as €12,000, is one of As part of the deal Mr Arnold’s stake
Europe’s biggest bicycle brands and sells will reduce from 60 to 40 per cent.
to consumers through its own website. Canyon said that the founder would
Over the past three years the company reinvest “a significant part” of his pro-
has doubled annual sales to €400m and ceeds into the company without disclos-
is growing by 25 per cent a year. ing details. GBL will also acquire a 40
Cycling’s surging popularity during per cent stake in Canyon previously
the pandemic, which has caused held by private equity fund TSG Con-
demand for two-wheelers to outstrip sumer Partners.
supply in cities such as London and Ber- GBL holds stakes in 11 listed compa-
lin as well as boosting cycling infrastruc- Canyon has benefited from a surge in nies including Adidas, Pernod Ricard
ture, has been a further boon to the cycling brought on by the pandemic and LafargeHolcim.
DECEMBER 16 2020 Section:Companies Time: 15/12/2020 - 18:45 User: timothy.digby Page Name: CONEWS2, Part,Page,Edition: ASI, 8, 1
Wednesday 16 December 2020 ★ FINANCIAL TIMES 9
COMPANIES & MARKETS
Fixed income. US bonds Fixed income
China rebukes
Historic rally threatened by
rating agency
spectre of renewed inflation over quality
control issues
Hudson Lockett and Thomas Hale
Hong Kong
Sun Yu — Beijing
China has suspended one of its top
credit rating agencies after a former
executive was accused of taking “mas-
sive” bribes, as a growing pile of defaults
hit the $4tn corporate debt market.
The China Securities Regulatory
Commission said yesterday it was tem-
porarily freezing the licence of Golden
Credit Rating and forbidden it from tak-
ing new business for three months.
The move came as Shandong Ruyi,
China’s largest textile manufacturer,
looked set to default on a second bond.
China’s debt markets, the world’s sec-
ond-biggest, have been hit by a series of
defaults by state-run enterprises
recently. Investors had assumed that
authorities would bail out these groups.
The regulator yesterday said Golden
Credit had failed to justify some of its
credit ratings and upgrades. It ordered it
to “immediately carry out a compre-
hensive rectification . . . strengthen
internal controls and compliance man-
agement, strictly police business prac-
tices and improve the quality of ratings”.
China’s credit rating agencies have
been criticised for standing by their tri-
ple A ratings for troubled state-owned
companies in the face of the defaults.
“Most private investors do not take
credit ratings seriously as the system
Fund managers warn that US inflation predictions rise as investors eye economic recovery The Fed said could unleash a jolt of pent-up activity. ‘The government
in August it “The stars are aligning to put the econ-
investors are ‘complacent’ US 10-year break-even rate (%) would tolerate omy on a pace for a robust recovery,” wanted to set [it] as an
2.5 higher levels said Sonal Desai, chief investment example and make
over risk of price growth
of inflation officer at Franklin Templeton’s fixed
— Getty others behave’
income group. “That sets us up for defi-
2.0
Tommy Stubbington — London nitely some inflation in the second half
Colby Smith — New York of next year.” does a bad job in measuring risks,” said a
1.5 Investors are taking cover. Demand former China rating agency executive.
Bond investors are bracing themselves for Treasury inflation-protected securi- He said agencies are motivated to
for the risk that 2021 could herald the 1.0 ties has surged in recent weeks, with inflate their ratings to attract clients and
return of a long-dormant foe: inflation. roughly $4.5bn poured into relevant are pressured to support government-
The price of government bonds has funds since the beginning of November, linked groups’ financing efforts.
0.5
rocketed this year, largely because of the according to EPFR. The executive called the suspension
giant bond-buying programmes under- 2018 19 20 Investors are already seeking alterna- “a political decision”. “The government
taken by central banks to soften the Source: Bloomberg tives to ultra-safe assets such as Treas- wanted to set [it] as an example and
financial impact of the pandemic. Inves- uries, sending prices lower and yields make others behave,” he added.
tors are assuming this support will con- ery. If inflation picks up in a way that’s BlackRock’s Bob Miller, who heads its higher. Benchmark 10-year Treasury The problems in China’s bond mar-
tinue, even as economies pull out of not expected, that would challenge the fundamental fixed income team for the notes now yield about 0.9 per cent, hav- kets come as foreign investors have this
their 2020 slump. market’s entire view.” Americas, is among those who worry ing traded below 0.7 per cent less than year increased their holdings of Chinese
A rebound in inflation, which has Concerns about inflation are gather- that experience has left investors “com- three months ago. treasuries and debt issued by big policy
been elusive since the 2008 financial ing pace particularly in the US, prompt- placent” about the prospect of con- Some investors question whether any banks, the latter at a record. However,
crisis, could disrupt these widely held ing some speculation that the Federal sumer price increases next year. And pick-up in inflation would last, citing the their exposure to the default-hit corpo-
expectations by making the debt mar- Reserve could be compelled to with- now, with bond yields at depressed lev- scale of the coronavirus shock and the rate credit market is low.
ket look less attractive. Bonds typically draw its support sooner than indicated. els, the room for error is very limited. failure of US policymakers to agree on Shandong Ruyi, once known as the
provide investors with a fixed stream of The shift in pricing is subtle but signif- “The market is a little bit hung up on additional fiscal support. Steven Oh, LVMH of China, defaulted on a Rmb1bn
interest payments, which become less icant. In the eurozone, inflation expec- the last decade’s experience,” he said, global head of credit and fixed income at ($153m) bond on Monday and looked
valuable as the overall cost of goods and tations remain far below the ECB’s tar- adding that investors should buy assets PineBridge Investments, thinks a likely set to miss payment on a separate
services accelerates. get of just below 2 per cent. But the 10- that protect against inflation on a two- rise in inflation in the spring should be Rmb1bn bond due yesterday.
If price pressure finally erupts, it year US “break-even” rate — a proxy for to-four year time horizon. fleeting and largely ignored by investors “In a way it’s the bond market hitting
would also ricochet through riskier investors’ expectations over the next His argument rests on the pivot from and central bankers alike. puberty,” said Edmund Goh, director of
assets. The 2020 rally in global equities decade — is rising. It has climbed from the Fed this year. The US central bank Assuming central bankers will look Asia fixed income at Aberdeen Standard
has been powered by the rise in bond below 1.6 per cent in September to about said in August it would tolerate higher the other way comes with considerable Investments, of the recent defaults.
prices, which has pushed borrowing 1.9 per cent, putting it at the highest levels of inflation to make up for the risks, however. Historically high prices He added that the repayment woes
costs to historic lows and eased jitters since May 2019 and just below the Fed’s prolonged period in which consumer of both bonds and stocks are premised would “definitely” give investors second
‘The stars
over the widening gulf between stock average inflation target of 2 per cent. price increases have faltered below its on expectations of years of rock-bottom thoughts about buying into corporate
prices and corporate profits. The chance of inflation skittering out target, a switch from its previous policy are aligning interest rates, and both could tumble if debt in China. Many foreign investors
“Inflation staying low and well- of control is low, analysts said. Given the of pre-emptively raising interest rates to the Fed signals even a chance of higher were already sceptical over China’s offi-
to put the
behaved is the foundation on which eve- pandemic, it may be some time before stymie inflation above 2 per cent. borrowing costs, according to Shamik Our global cially low default rate, which implied
rything in markets is currently priced,” workers are in a position to push for Market participants reckon this economy Dhar, chief economist at BNY Mellon team gives you the presence of “zombie companies”.
said Karen Ward, chief market strate- wage increases. And even once labour means US interest rates, which exert a Investment Management. market-moving The suspension came less than 24
on a pace
gist for Europe at JPMorgan Asset Man- markets heal, the demographic and pull across all assets, will remain teth- “That’s a world where fixed income news and views, hours after authorities said they would
agement. “Investors’ assumption is that technological shifts that many econo- ered to zero at least into 2023. for a robust stops being a hedge for equities, and 24 hours a day prosecute Jin Yongshou, the agency’s
central banks will be able to stay accom- mists have said depressed inflation over But once Covid-19 vaccines are widely both sell-off together,” he said. “That ft.com/markets former general manager, for allegedly
recovery’
modative well into the economic recov- the past decade will remain in place. distributed, businesses and consumers would be a big shock.” taking bribes to boost issuers’ ratings.
Commodities Equities
Travel woes and vaccine delays weigh on Fear of dilution prompts investors in
next year’s oil demand outlook, says IEA AirAsia long-haul unit to jettison stock
Anjli Raval business travel will probably remain ulation programmes, it said “it will be Stefania Palma — Singapore tractual commitments [that] will pre- secure creditors’ support for the debt
muted as companies keep a tight rein on several months before we reach a criti- Peggy Hollinger — London cipitate a potential liquidation of the air- restructuring.
Oil demand will rebound more slowly
than initially anticipated in 2021 as the costs. cal mass of vaccinated, economically Shares in AirAsia’s long-haul unit fell as line” barring restructuring. “Several lessors have intervened in
aviation sector takes longer to recover Oil prices crossed back above $50 a active people and thus see an impact on much as 9.5 per cent yesterday in AirAsia group’s Japanese unit has filed the restructuring proceedings to regis-
from the coronavirus hit, the Interna- barrel earlier this month for the first oil demand”. response to a RM500m ($123m) rights for bankruptcy and it is reviewing its ter their objections to the scheme,” Air-
tional Energy Agency said yesterday. time since March, fuelled by optimism The group warned that the Christmas and share issuance plan as the Malay- investment in India. Asia X said. The carrier added that it
that a rollout of Covid-19 vaccines could period could bring another surge in Cov- sian carrier tries to win creditor back- On Monday, AirAsia X also said it was would continue engaging with creditors
Global consumption is expected to spur economic activity and a recovery id-19 cases and the possibility of more ing for a proposed debt restructuring. seeking to further shrink its issued to ease concerns.
come in at 96.9m barrels a day next in oil demand. Brent crude, the interna- confinement measures. share capital by 99.9 per cent in “The alternative to the scheme is a liq-
year, it said. While this is up from the tional marker, was broadly flat in early It is possible that, after the holidays, The tumble in AirAsia X’s stock came response to “representations made by uidation of the airline without any
91.2m b/d forecast for 2020, it is about trading yesterday at $50.23 a barrel. “a third wave of the virus will affect after the airline on Monday night pro- returns to creditors”.
200,000 b/d below what the Paris-based While the IEA noted “the understand- Europe and other parts of the world posed a rights issue of up to RM300m ‘A lot will depend on the One AirAsia X creditor, who did not
body predicted in November. able euphoria” around the start of inoc- before vaccines have time to take effect. and an issuance of new shares via a spe- wish to be identified, said last month
ability to actually raise the
In its monthly market report, the IEA This would bring renewed downward cial purpose vehicle of up to RM200m. that it objected to the debt restructuring
said governments would probably keep pressure on oil demand,” said the IEA. The company said the plan was a amount they want [in the plan. “We suspect we may have to make
in place border closures and travel Crude stockpiles that had built up as “critical component” of the RM63.5bn some judgment call and take impair-
rights and share issuance]’
restrictions until a vaccine was widely consumption dropped were unlikely to debt restructuring that is a last-ditch ments on receivables in the current
available, extending the disruption to deplete until the end of 2021, it added. attempt to save its business. But the year. That will diminish our exposure.”
the airline industry. On the supply side, global oil produc- arrangement is subject to the approval certain creditors”. It had previously pro- The latest fundraising would finance
“Demand is clearly going to be lower tion rose 1.5m b/d in November to 92.7m of the Malaysian bourse and AirAsia X posed a reduction by 90 per cent. working capital requirements including
for longer than expected,” the IEA said. b/d as the US sector recovered from hur- shareholders at a forthcoming extraor- Paul Yong, equity analyst at DBS, said staff salaries and aircraft activation
The body, which advises big econo- ricane shut-ins and Libya built its out- dinary general meeting. yesterday’s share price drop was not costs for 24 months, according to a stock
mies on energy matters, added that put back up. The IEA said the deal AirAsia X’s deputy chairman said in surprising because of the dilution effect exchange filing.
while consumers might be keen to struck this month by Opec and allied October that the carrier had run out of of a rights issue. But longer term, “a lot The airline industry has been pum-
resume holidays once travel bans were producers such as Russia to increase money and was liquidating its Indonesia will depend on the ability to actually melled by the pandemic, with border
lifted, older people would remain cau- supplies by 500,000 b/d next month — business as well as writing down its 49 raise the amount they want to raise.” controls and travel restrictions all but
tious. well below the 2m b/d initially planned per cent stake in Thai AirAsia X. AirAsia X, which was founded by wiping out passenger traffic.
Others affected by the financial — was “based on a recognition that the That same month the airline, whose Malaysian tycoon Tony Fernandes and In July, AirAsia’s auditor warned of
impact of the pandemic will have less to Crude oil prices crossed back above market remains fragile and is in need of shares have fallen 39 per cent this year, has been in operation for 13 years, has “significant doubt” about whether it
spend on tickets, it predicted, while $50 a barrel earlier this month careful adjustment”. warned of “an imminent default of con- encountered resistance as it tries to could continue as a going concern.
DECEMBER 16 2020 Section:Markets Time: 15/12/2020 - 18:09 User: alistair.fraser Page Name: MARKETS1, Part,Page,Edition: EUR, 9, 1
10 ★ FINANCIAL TIMES Wednesday 16 December 2020
COMPANIES & MARKETS
The great disconnect has
The day in the markets
continued much longer
What you need to know
than most expected
3 Wall Street on track to snap four- US dollar slides towards 2-year low against peers
session losing streak
DXY index
3 Pound strengthens on reports of
Mohamed El-Erian
progress in Brexit talks
3 US dollar closes in on a two-year low 102
against peers
Markets Insight 100
Global stocks were mixed yesterday as
governments imposed stricter Covid-19
98
restrictions and political negotiations on
both sides of the Atlantic remained
W hat, if anything, will ful dynamic, and one that inevitably sufficient to fully offset the impact of unresolved. 96
happen to the great overshoots. corporate bankruptcies or the detri- Wall Street’s S&P 500 index was up
disconnect between Nothing is more reassuring to an mental effects of higher inequality. more than 1 per cent at lunchtime in New
94
Wall Street and Main investor than the knowledge that cen- Investors might rue the day they ven- York, rebounding from four consecutive
Street? This is a key tral banks, with much deeper pockets, tured into asset classes far from their days of losses, while the tech-heavy
question for investors positioning their will buy the securities they own — par- natural habitat that lack sufficient Nasdaq Composite climbed 0.8 per cent. 92
portfolios for 2021. It is also an impor- ticularly when these buyers are willing liquidity in a correction. The improved market sentiment
tant question for the global economy to do so at any price and have unlimited Navigating such a landscape will continued “to weigh on the dollar”, said
90
and policymakers. patient capital. The rational investor require analytical tools that would, iron- Win Thin, global head of currency
Throughout this pandemic year, we response is not just to front-load their ically, have detracted from returns dur- strategy at Brown Brothers Harriman,
have experienced a further sharp wid- buying but also to look for related ing the bulk of the liquidity-driven rally. referring to weakness in the greenback. 88
ening of an already remarkable gap opportunities where return-seeking I am thinking here of such things as The US Dollar index — a measure of 2018 19 20
between financial markets and the funds will be pushed to. The result is not highly granular credit and technical the currency against six peers — slid 0.3
economy. A rapid recovery in asset just seemingly endless liquidity-driven analyses, scenario planning, smart per cent to close in on a two-year low. Source: Refinitiv
prices from the March 23 lows took rallies regardless of fundamentals. It structuring, assessments of liquidity in Europe’s region-wide Stoxx 600 closed
major US indices to record levels, even also alters market conditioning and market segments, and a better under- 0.3 per cent higher but the strong pound Washington. Renowned investor Warren the South East as infections climbed,
before the recent good news on inverts traditional cause and effect. standing of the extent of recoverability weighed on the global-facing companies Buffett said yesterday the US was while New York mayor Bill de Blasio
Covid-19 vaccines. Combined with even Based on what we know today, the of investment mistakes. It also includes of London’s FTSE 100, which slid 0.3 per fighting an “economic war” and called on warned that the biggest US city faced a
more accommodative central bank poli- challenges facing investors in 2021 are a willingness to re-examine some con- cent. lawmakers to support small businesses potential “full shutdown”.
cies, this enabled record debt issuance ventional wisdom. This involves Sterling surged 0.9 per cent against the being harmed by the pandemic. Data released yesterday showed the
at historically low levels of compensa- Central banks’ deepening rethinking the traditional portfolio con- dollar to $1.3442 yesterday on reports The health crisis remained front and UK unemployment rate rose to 4.9 per
tion for creditors. struct of putting 60 per cent of funds that considerable progress was being centre for investors, said Shoqat cent in the three months to October. Still,
distortion of markets
Meanwhile, the global economic situ- into equities and 40 into fixed income made on a trade deal between the UK Bunglawala, a portfolio manager at some economists were optimistic about
ation remains uncertain. Another coro- will be harder to defend now that yields on government bonds and the EU. Goldman Sachs Asset Management. next year. “With the rollout of vaccines
navirus wave is sending parts of Europe are so artificially depressed. “Big buzz . . . among Tory MPs that the Markets were “still being driven in large set to boost demand in 2021, we now
in a recovering economy
back into recession. That is sapping Already, the great disconnect has con- UK is heading towards a Brexit deal with part by the spread of the virus” and were think that the jobless rate will peak at 7
energy out of the US recovery, and limit- tinued much longer than most the EU,” wrote Nicholas Watt, a BBC pricing in the rollout of a vaccine and a per cent rather than 9 per cent and be
ing the extent to which better perform- probably less about the first few weeks expected. This illustrates, yet again, the political editor, on Twitter. broad recovery, he said. back at 4 per cent by 2023,” noted Ruth
ing east Asia can be a powerful locomo- and more about later in the year. That is unintended consequences of a policy In the US, traders were monitoring Heightened restrictions were Gregory, senior UK economist at Capital
tive of global growth. The longer this unless one or more disrupter is sud- approach that places an excessive bur- news on a potential fiscal stimulus deal in announced on Monday for London and Economics. Camilla Hodgson
continues, the greater the risk of “scar- denly accelerated — a monetary policy den on central banks. The hope for 2021
ring” that erodes longer term growth. reversal (highly unlikely), a market is that, with a vaccine-enabled eco-
An uncertain economic outlook with accident due to excessive risk-taking nomic recovery, better corporate funda- Markets update
notable dispersion among systemically (more likely but not overwhelmingly mentals will start validating elevated
important countries is but one of the so), and mounting corporate bankrupt- asset prices and allow for an orderly
key Covid-19 legacies that markets cies (most probable but would play out rebalancing of the monetary-fiscal-
have set aside due to sky-high faith in over time). While investors will con- structural policy mix. There are two US Eurozone Japan UK China Brazil
central banks’ ability to shield asset tinue to surf a highly profitable liquidity risks, and not just for markets. First, Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
prices from unfavourable influences. wave for now, things are likely to get what is desirable may not be politically Level 3670.88 1517.26 26687.84 6513.32 3367.23 116303.41
Markets being markets, investors have trickier as we get further into 2021. feasible, and second, what has proven % change on day 0.64 0.27 -0.17 -0.28 -0.06 1.48
readily extended the protective nature Central banks’ deepening distortion feasible is no longer sustainable. Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
of the umbrella to asset classes that, of markets will be harder to defend in a Level 90.669 1.215 103.735 1.340 6.545 5.102
at best, are only indirectly supported recovering economy amid rising infla- The writer is president of Queens’ College,
% change on day -0.046 0.165 -0.331 0.601 0.118 -0.252
by central bank funding (such as emerg- tionary expectations. As welcome as Cambridge university, and adviser to
Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
ing markets). It is an extremely power- this recovery will be, it is unlikely to be Allianz and Gramercy
Yield 0.903 -0.613 -0.002 0.258 3.288 6.750
Basis point change on day 0.090 0.800 -1.050 3.700 -1.400 -6.900
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 416.61 50.80 47.61 1831.15 23.86 3455.40
% change on day 0.50 0.97 1.28 -0.59 0.17 0.37
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.
Main equity markets
S&P 500 index Eurofirst 300 index FTSE 100 index
7040
3840 1600
3680 1520
6400
3520 1440
5760
3360 1360
3200 | | | | | | | | | | | | | | | | | | | | 1280 | | | | | | | | | | | | | | | | | | | | 5120 | | | | | | | | | | | | | | | | | | | |
Oct 2020 Dec
Oct 2020 Dec Oct 2020 Dec
Biggest movers
% US Eurozone UK
Halliburton 4.98 Arcelormittal 7.27 Johnson Matthey 4.07
Wynn Resorts 4.45 Thyssenkrupp 6.79 Melrose Industries 3.59
ps Boston Scientific 4.25 Volkswagen 5.76 Standard Life Aberdeen 3.05
U
Skyworks Solutions 3.96 Porsche 5.52 Jd Sports Fashion 3.04
Western Digital 3.76 B. Sabadell 5.06 Persimmon 2.71
%
Apartment Investment And Management -87.41 Danske Bank -2.76 Rightmove -3.40
Norwegian Cruise Line Holdings Ltd -2.70 Jeronimo Martins -2.74 Rolls-royce Holdings -2.91
s
n
w Newell Brands -2.29 Inditex -2.48 Hikma Pharmaceuticals -2.78
o
D Royal Caribbean -2.08 Kpn -2.28 Glaxosmithkline -2.50
Alliance Data Systems -2.01 Iliad -2.27 Astrazeneca -2.43
Prices taken at 17:00 GMT Based on the constituents of the FTSE Eurofirst 300 Eurozone
All data provided by Morningstar unless otherwise noted.
Wall Street Eurozone London
Prevail Therapeutics, a gene therapy The announcement of “robust business” JD Sports rose following news it had
group, soared on news that it was being this year helped to lift Metro. The bought US company Shoe Palace for
bought by Eli Lilly for $22.50 a share, German wholesaler proposed a dividend $681m. The UK retailer will pay $325m in
an 80 per cent premium on Monday’s of €0.70 per share while like-for-like sales cash and issue a 20 per cent equity stake
closing price. for the financial year 2019/20 were down in its US subsidiary, valued at $356m, to
The deal was “in line with Lilly’s 3.9 per cent, at the more conservative end the four Mersho brothers who run Shoe
mergers and acquisitions strategy of of guidance. Palace.
smaller complementary bolt-on deals This year the Düsseldorf group was “In a stroke, it gets JD Sports, which
and in our view fills a hole in Lilly’s also “able to gain significant market previously acquired Finish Line along the
pipeline, with obvious synergies given shares in its core business, amongst East Coast and middle America, an
Lilly’s size and clinical trial expertise”, said others in Germany, France and Italy”. opportunity to get even closer to the US
analysts at Bank of America. Umicore rallied after upgrading its consumer, particularly the Latino and
Eli Lilly, which is rated “buy” by 2020 guidance. The Belgian chemicals Hispanic communities,” said Greg
BofA with a target price of $180 a share, group expected adjusted earnings before Lawless, an analyst at Shore Capital.
also climbed. interest and taxes to be in the region of A performance that was “ahead of the
Norwegian Cruise Line fell after €530m for the full year, up from €465m to board’s expectations” sent Chemring to
announcing that it was proposing to €490m in a previous forecast. The an eight-year high. For the full year
sell $500m of its senior notes due in 2026 improved outlook reflected “a stronger ending October 31, underlying profit
in a private offering. Proceeds from the than anticipated performance in before tax rose 31 per cent to £51.7m at
sale would be used “for general corporate November and December in catalysis and the defence contractor.
purposes”. Norwegian Cruise, which is recycling” units. Panmure analyst Sanjay Jha upgraded
down almost 60 per cent this year, said Spanish pharma group Reig Jofre the Hampshire group from “hold” to
earlier this month that it would extend soared after striking a deal with Johnson “buy” with a target price of £3.02 a share.
the suspension of all its voyages until late & Johnson to produce the US company’s “With growth in the US and UK defence
February. Covid-19 vaccine candidate. budgets now approved, we believe the
Drug group Anchiano Therapeutics Reig Jofre would be responsible for the investment in Countermeasures [radio
skyrocketed on confirmation of its merger formulation, filling and packaging of the frequency and infrared division] should
with Chemomab. The deal would create a drug, which would then be distributed by deliver appropriate returns,” said Mr Jha.
company focused on advancing Janssen, a Belgian subsidiary of J&J. “This, in combination with the
Chemomab’s lead product, CM-101 — a The Barcelona group said in a third- structural growth in cyber and
drug in phase 2 clinical trials aimed at quarter statement last month that it had biological security spend, should
treating inflammatory-fibrotic diseases the capacity “to produce up to 50m vials enable Chemring to generate double-
affecting multiple organs such as the per year” of a Covid-19 vaccine. digit earnings per share growth over the
liver, skin and lungs. Ray Douglas Ray Douglas financial year 21-22 period.” Ray Douglas
DECEMBER 16 2020 Section:Markets Time: 15/12/2020 - 18:58 User: alistair.fraser Page Name: MARKETS2, Part,Page,Edition: EUR, 10, 1