Coronavirus latest: Developed market countries borrowed $11tn from January to May

Coronavirus latest: Developed market countries borrowed $11tn from January to May

Philip Morris reinstates full-year forecast after challenging quarter

Patricia Nilsson in London

Philip Morris International said revenues and profits dropped after a “very challenging” quarter but the tobacco group reinstated its full-year forecast, betting that coronavirus-induced lockdown measures will not strike key markets further this year.

A decline in cigarette sales, partially due to duty free shops closing during the restrictions, caused net revenues in the quarter ending June to drop 13.6 per cent to $6.7bn, compared with the same period last year. Profit before taxes dropped 15.6 per cent to $2.5bn in the same period, the group said on Tuesday.

Shares in the tobacco group, which has dropped by about a fifth since February, rose nearly 4 per cent in pre-market trading in New York.

André Calantzopoulos, the chief executive, said the results were above the group’s expectations “despite a very challenging quarter due to the pandemic”.

Tobacco sales picked up again in June, especially in “higher margin” Europe.

With another three months of disrupted business behind it, the company reinstated its full-year forecast of at least $4.84 in reported diluted earnings per share, down from the guidance of at least $5.50 that it originally provided in February.

Lockheed Martin boosts 2020 outlook

Lockheed Martin raised its forecasts for earnings and sales this year, after the US defence group recorded stronger results in the second quarter despite the pandemic’s impact on supply chains.

The company said on Monday favourable contract award timing and strong performances by its business units in the June quarter more than offset the impact of Covid-19, with the crisis leading to higher costs and delays in supplier deliveries.

“Despite these challenges, the corporation and US government’s proactive efforts, especially with regard to the supply chain, helped to partially mitigate the disruptions caused by Covid-19 on the corporation’s operations in the second quarter,” Lockheed Martin said.

Lockheed Martin now expects net sales of $63.5bn to $65bn in 2020, compared with its April forecast of $62.25bn to $64bn. It estimated full-year earnings per share of $23.75 to $24.05, up from a range of $23.65 to $23.95.

In the second quarter, a 17 per cent increase in sales for Lockheed Martin’s aeronautics unit – which is responsible for the F-35 fighter jet – helped drive total revenues up 12.4 per cent to $16.2bn. Net earnings climbed to $1.6bn, or $5.79 a share, from $1.4bn, or $5 a share, in the year-ago quarter.

Earnings came in at $6.13 on an adjusted basis, higher than analysts’ average estimate of $5.72, according to Refinitiv.

Shares in Lockheed Martin jumped 4 per cent in pre-market trading. The stock was down 6.1 per cent year to date as of Monday’s close.

Wall Street set to rise after German stocks turn positive for 2020

US stocks were tipped to make further gains, while Germany’s main stock index turned positive for the year after EU leaders struck an agreement for a €750bn pandemic recovery fund and on hopes for a coronavirus vaccine.

Futures tied to the S&P 500 were up 0.7 per cent on Tuesday, suggesting the US benchmark stock index would rise for a third consecutive day when trading begins on Wall Street.

The Dax index of German blue-chip stocks rallied 1.8 per cent on Tuesday, to produce a gain so far this year of 0.3 per cent. It had been down more than 35 per cent during the darkest days of March. Investors also snapped up the debt of EU countries whose public finances have been especially hard-hit by the virus.

Tapestry chief quits, prompting board shake-up at luxury brands group

Tapestry’s chief executive will leave the Kate Spade owner with immediate effect after not even a year in the top job, resulting in a complete shake-up of management.

Jide Zeitlin, who had also been chairman for almost six years, resigned from the New York-listed company and its board for “personal reasons”. The former Goldman Sachs banker took over in September from his predecessor Victor Luis who had been at the helm

Fiscal fourth-quarter earnings will exceed its expectations, the group behind Coach as well as Kate Spade, said on Tuesday, even as pressure from the Covid-19 pandemic will be evident. Tapestry will update its quarterly figures next month.

Chief financial officer Joanne Crevoiserat will act as interim leader, with Todd Kahn taking over as acting chief executive and brand president of Coach. Susan Kropf, an independent director, will chair the board of directors.

Tapestry will start its search for a permanent chief executive, it said in a statement on Tuesday. Mr Luis, before leaving the group, had sought to transform the group from a bag brand into a luxury conglomerate.

The group’s shares have shed more than a fifth of their value this year.

Its inventory has declined from a year earlier while it has a cash balance of about $1.4bn.

Coca-Cola sales drop the most in at least a decade

Alistair Gray

Coca-Cola’s quarterly sales have dropped by the most in at least a decade, contrasting with a resilient performance from its rival PepsiCo and raising questions about the drinks company’s defensive qualities.

Second-quarter sales slid 28 per cent year over year to $7.2bn after the US-based group was hit by the closure of bars, restaurants and other venues through which it normally generates about half its annual revenues.

The sharp turnround in Coca-Cola’s fortunes contrasts with its results during the financial crisis and its aftermath, when the company demonstrated it could outperform in recessions. Revenues at Coca-Cola, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway, rose 11 per cent in 2008 and lost only 3 per cent in 2009.

Results published on Tuesday showed Coca-Cola’s organic revenues fell sharply at each six of its main divisions in the three months to June 26, pushing net income down a third from last time to $1.76bn.

The Europe, Middle East and Africa business was particularly hard hit, down 26 per cent. North America’s organic revenues fell 18 per cent.

L’Occitane shrugs off worst of lockdown effects thanks to China

Harry Dempsey

Online sales at L’Occitane almost doubled in the three months to June, with the French beauty group’s popularity in China and Taiwan also providing protection from lockdowns across the rest of the world.

In the quarter, the group said, total sales fell 22 per cent to €274m, a much milder decline than those posted by other global fashion and beauty brands during the Covid-19 crisis.

China, whose coronavirus cases peaked in February following strong implementation of and adherence to lockdown measures, overtook Japan as L’Occitane’s second-largest market during the quarter. Taiwan, which also battled the virus early and aggressively and has suffered just seven deaths, was the only other market where L’Occitane’s sales grew.

“It is still too early to say whether this recovery will be emulated in Europe and the Americas as economies reopen,” said Reinold Geiger, chief executive of L’Occitane.

Shares in the Hong Kong-listed group rose 3 per cent following the trading update.

Middle East faces deeper recession as twin blows strike, study says

Simeon Kerr in Dubai

Countries in the Middle East and North Africa are facing deeper recessions than their emerging market peers as the region bears twin shocks of lower oil prices and coronavirus.

An expatriate exodus of 5 to 10 per cent of the population is likely, shrinking nominal gross domestic product, MUFG said in a presentation.

Mena growth of 0.3 per cent last year is forecast to swing to a contraction of 5.5 per cent this year, compared with negative growth of 3 per cent in emerging markets – before rebounding to 3.6 per cent in 2021.

While the region looks to be “over the worst” of Covid-19 as new case growth eases, data point to stronger activity from April’s nadir as economies reopen. But there is no “v-shaped recovery”, it said.

The bank’s composite index shows that the Middle East and North Africa is operating at one-third below pre-virus levels, with activity relating to the level at which “fear” is subsiding rather than the pace of reopening.

States with lower overall case numbers, such as Jordan, Israel and the United Arab Emirates, have witnessed a faster pace of recovery in retail and recreation mobility data than neighbours with higher per capita rates, such as Qatar and Bahrain.

Fiscal and external deficits are “exceptional” this year, the research said.

MUFG’s base case of $43 a barrel average price for Brent crude this year implies that the oil-rich Arab Gulf states will face fiscal funding requirements of 12.6 per cent of GDP, or $208bn.

The bank remains bullish on the oil price outlook, forecasting Brent to end this year at $46 a barrel and averaging $55 a barrel next year.

Iran reports another record tally as nation steps up face masks efforts

Najmeh Bozorgmehr in Tehran

Iran registered another record in coronavirus deaths as the Islamic republic steps up its efforts to ensure more citizens wear face masks in public.

The latest daily tally published on Tuesday showed 229 Covid-19 patients died.

A more forceful campaign urges citizens to wear face masks in public while the police said on Tuesday that some businesses were shut down for failing to observe hygienic standards.

Iran has been unable to impose strict lockdowns as the economy is struggling with the consequences, including the devaluation of its currency, of US sanctions.

It has been impossible to enforce lockdown measures due to the economic hardships, health minister Saeed Namaki told some members of parliament in a closed session on Tuesday, according to MP Mohsen Fathi.

At least 278,827 Covid-19 cases have been confirmed, bringing the total deaths to 14,634 since the outbreak began.

Iran remains the hardest hit country in the Middle East in terms of death tolls. Iranians are not yet permitted to cross the border into neighbouring countries.

Higher earners more able to work from home, ONS finds

Daniel Thomas in London

Chief executives and other well paid white collar executives are among the most able to work from home, raising questions over decision-making for longer term office plans that affect staff less able or willing to work remotely.

Lower paid and younger workers in smaller, shared homes are often less happy about having to work from home than more senior managers, who tend to live in larger places that are better equipped for longer term remote working, a report from the Office for National Statistics showed.

About 1.7m people — or 5 per cent of the workforce — reported working mainly from home in 2019 before the pandemic. But the ONS said that just over a quarter of adults worked exclusively at home in a survey taken in the second week of July, a slight decrease from 30 per cent of adults surveyed the week prior as lockdown restrictions continued to ease.

Companies are starting to consider when and how to bring back their workers, with RBS saying on Tuesday that about 50,000 of its staff would be working from home into 2021.

According to the ONS analysis of remote working during the pandemic, workers who earned more tended to work in jobs with more scope for homeworking. Jobs in London and the South East were more likely to be able to be carried out from home, reflecting the higher proportion of finance and IT jobs.

Chief executives and senior officials, whose median earnings are £44.08 an hour, are among those most able to work remotely, as are financial managers, directors, programmers and software development professionals. Economists and statisticians were found most able to work from home.

But the ONS pointed to the sorts of jobs that require being at a place of work such as gardening, construction and other labourers as also among the poorer paid. Among the jobs least likely to be able to work from home were frontline workers in police, health and fire services.

Public sector workers to receive inflation-busting pay rise

Chris Giles in London

The UK chancellor has accepted the recommendations of the public sector pay review bodies in full, leading to pay rises for 900,000 public sector workers significantly ahead of inflation.

The move, Rishi Sunak said, was in recognition of the contribution the public sector had made in the coronavirus crisis, and comes after many years of squeezed pay levels.

Although the annual pay increases, ranging up to 3.1 per cent for teachers in England, will add to pressure on the public finances, they will be minor compared with the near £200bn measures the government has introduced since March to battle coronavirus.

The pay rises run ahead of inflation, which was 0.6 per cent in June, but the public sector has seen the real value of pay fall substantially in the past decade of austerity since 2010.

Chris expands his story: Public sector workers to get inflation-busting pay rise

Study shows more New Delhi residents exposed to virus than thought

Amy Kazmin in New Delhi

Nearly a quarter of New Delhi’s residents have antibodies showing that more have been exposed to the novel coronavirus that causes Covid-19 than initially thought.

The seroprevalence testing of 21,387 randomly selected residents from across the Indian capital was carried out from June 27 to July 10. Of those sampled 23.5 per cent had the IgG antibodies, which indicates a past exposure to the virus. Many have not displayed obvious symptoms.

The study shows the spread of the virus in India’s hardest hit big cities is more widespread than Narendra Modi’s government has been willing to acknowledge.

Until now, New Delhi has detected coronavirus infections in 123,747 patients, of whom 3,663 have died.

Many public experts said the results were good news, indicating that the city’s residents may be moving closer to herd immunity, which could make it more difficult for the virus to spread at such a rapid rate.

It remains unclear, however, how long immunity conferred by these antibodies will last, or whether people can be susceptible to re-infection and more serious illness later. Studies conducted elsewhere have indicated that such antibodies may disappear after a few months.

India’s health ministry said the study indicated that “a significant proportion of the population is still vulnerable” and that isolation measures “need to continue with the same rigour”.

In June, the Indian Council for Medical Research conducted a nationwide seroprevalence study to test for antibodies to Covid-19. The research found 0.7 per cent have been exposed nationally.

Experts with access to the results, which were never made public, say it found that seroprevalence levels in some neighbourhoods of Maharahstra were as high as 46 per cent, while the seroprevalence levels in certain areas of the prime minister’s home state of Gujarat were 65 per cent.

Until now, Mr Modi’s government has been adamant that India has not witnessed community spread of the coronavirus. Health experts say such claims make no sense given the soaring caseload.

India has a total of 1.1m confirmed cases, and more than 28,000 deaths.

Developed market countries borrow $11tn from January to May

Federica Cocco

Central government borrowings from the markets have hit a record high in developed countries in the first five months of 2020 as governments ramped up spending to deal with the coronavirus pandemic.

Governments issued debt securities worth $11tn between January and May 2020 — almost 70 per cent higher than average issuance occurring in the same period over the past five years.

According to the OECD, which released the report on Tuesday, the surge in borrowing coupled with tumbling GDP “will carry the debt-to-GDP ratio to an unprecedented level”. The OECD expects an increase of 13.4 percentage points in 2020, higher than the 12.6 point increase that occurred at the height of the financial crisis.

Samsung Biologics prospers from pandemic vaccine hunt

Song Jung-a in Seoul

Samsung Biologics reported a fourfold increase in quarterly sales to become one of the few South Korean companies to be prospering during the pandemic.

The biopharmaceutical company swung to an operating profit of Won81bn ($68m) in the April-June period, from a Won15bn operating loss a year earlier. Its second-quarter operating profit increased nearly 30 per cent from the previous three months. Sales jumped 294 per cent year on year to Won307bn.

The South Korean company has clocked more than Won1.8tn of orders this year, surpassing sales of Won702bn last year, as the global race to develop Covid-19 vaccines and treatments has helped the contract manufacturer win more deals. The company is considering building another plant to meet growing orders.

In April, the biopharmaceutical unit of Samsung Group won a $358m order from US company Vir Biotechnology to produce antibodies to potentially treat Covid-19.

Its share price has more than doubled over the past four months, with its market capitalisation rising to $41.5bn.

India’s IndiGo to cut as much as 10% of workforce

Stephanie Findlay in New Delhi

India’s largest private airline plans to lay off a tenth of its workforce as the fallout from the coronavirus pandemic hammers the world’s fastest growing aviation market.

It is impossible for IndiGo to fly “through this economic storm without making some sacrifices”, the airline said late Monday. “It is clear we will need to bid a painful adieu to 10 per cent of our workforce.”

The spread of Covid-19 infections in India, which has the highest number of confirmed cases after the US and Brazil, has caused air travel to collapse. State government restrictions limit domestic flights.

IndiGo said the layoffs could affect more than 2,000 jobs based on the payroll.

The news of the job cuts at IndiGo, a major Airbus customer with a strong balance sheet, reflects the deep crisis in the sector.

In the company’s most recent earnings call on June 2, chief financial officer Aditya Pande said IndiGo was looking to raise fresh funds to boost liquidity.

European corporate debt market strains ease

The cost to insure against default on a basket of high-grade European corporate bonds has fallen to the lowest level since February, as a pact by EU leaders to launch a vast pandemic recovery fund has boosted investor sentiment. 

The spread on the Markit iTraxx Europe index on Tuesday narrowed to 57.9 basis points, down 4bp from the end of last week and well below the mid-March peak of 139bp.  

Markit’s iTraxx gauge measures the cost to protect against a default on a group of 125 European corporate bonds using instruments called credit default swaps. The CDS spread is seen as an indicator of the perceived risk of holding this debt and typically also viewed as a proxy for overall risk sentiment among investors. 

A separate index that tracks the CDS of riskier junk-rated borrowers has also shown signs of relief. The spread on the iTraxx crossover index was 340bp on Tuesday, down by more than half from its March high of 708bp. 

The tightening spread came as EU leaders forged an agreement for a €750bn fund to help the bloc’s member states rebuild their economies after the devastation wrought by coronavirus. 

Other European assets have been boosted by the recovery fund deal as well as a general rise in investor confidence on signs of promise in treatments and vaccines for Covid-19. 

Italian bonds have rallied for two days in a row, pushing the spread in yield between 10-year BTPs and German Bunds to a four-month low. Yields, which move inversely to prices, have also fallen for Spain and Portugal. 

Dubai developer ditches job titles in response to pandemic

Simeon Kerr, Gulf correspondent

Dubai property developer Emaar has removed employees’ job titles, in what it said would create a culture of “empowerment” in response to the challenge of coronavirus.

Mohamed Alabbar, formerly known as chairman of the builder of the world’s tallest tower, Burj Khalifa, said the pandemic had forced the company to reflect on all aspects of its business.

“The challenges we face now will be greater than ever, which is why I now want us to focus on talent, not titles,” he wrote in a memo to employees. While structures are needed, he said all staff should feel empowered to take “bold actions” and display “speed in execution”.

Emaar, which is a major hotel operator, in April slashed salaries as Dubai imposed one of the world’s strictest lockdowns. Mr Alabbar relinquished his entire salary.

The emirate reopened to tourists this month, but its reliance on trade and transportation leaves it particularly exposed to the economic toll of Covid-19.

Rating agency Moody’s this week warned that the credit quality of Dubai homebuilders would erode in the coming 18 months as the impact of the Covid-19 pandemic slows a property market that had already been in decline for five years.

Stock futures rise after deal reached on EU recovery fund

Futures tied to European stock indices rose following EU leaders reaching a deal on a pandemic recovery fund for the bloc.

Stoxx 600 futures were up 0.8 per cent, suggesting the continent-wide benchmark is poised to rise at the start of trading. Those for Frankfurt’s Xetra Dax were up more than 1 per cent.

The gains follow the promise of further stimulus after the EU nations agreed to provide €390bn in grants and €360bn in low interest loans to support the economic recovery from coronavirus after the bloc’s second-longest summit on record.

The spread on German and Italian bonds, which is a key measure of risk in the eurozone, narrowed to its lowest level in four months after the agreement was struck. However, investors continued to snap up haven assets with silver hitting its highest level in four years and gold continuing to ascend from its highest level in nine years to $1,820 a troy ounce.

Equities were further boosted by optimism over a potential coronavirus vaccine after a flurry of promising results from clinical trials.

Online sales boost recovery at Ted Baker

Fashion retailer Ted Baker has posted sales figures that have exceeded its management’s expectations, just weeks after it raised £95m in emergency funding.

For the 12 weeks to July 18, the group said, total retail sales fell 50 per cent from the same period last year.

Sales in its stores fell 79 per cent, which was slightly better than forecasts made by the group last month when it undertook a cash call to see it through the crisis that raised more money than the entire value of its listed equity.

Online sales, which accounted for two thirds of revenues during this period, rose by 35 per cent, strongly exceeding expectations.

Chief executive Rachel Osborne, who is implementing a digital-first transformation plan after Ted Baker issued four profit warnings within a year and confessed to a significant accounting error, cautioned investors that the group’s recovery was not yet assured.

Alongside the group’s trading update, Ms Osborne said:

Our performance is encouraging, but I caution that it is still early days, and we have a substantial amount of work to do over the next 12 months against a backdrop of significant uncertainty in the world.

However, the Brand has an exciting future, and I am looking forward with cautious optimism that the initiatives currently underway across all areas of the business will bear fruit over the next 12 months.”

BHP expects pandemic to hit copper output while virus costs rise

Neil Hume in London

The world’s biggest mining company BHP has warned of lower production in the year ahead because of the impact of the coronavirus pandemic on its copper business and falling demand for gas.

In an update, the Anglo-Australian company said its copper and petroleum output would decline by 13 per cent and 14 per cent in the financial year that runs until the end of June 2021. BHP said the costs of dealing with Covid-19 would be up to $150m.

Production at Escondida, the world’s biggest copper mine, could be down as much as 21 per cent to 940,000 tonnes as a result of lower grades and a reduced operational workforce due to pandemic, BHP said.

In its petroleum business, volumes are expected to decrease to between 95m and 102m barrels of equivalent in the 2021 financial year, reflecting expected lower demand in Eastern Australia and Trinidad and Tobago.

On a brighter note, BHP cashed in on higher prices for iron ore with record shipments of the steelmaking ingredient in three months to the end June of just over 77m tonnes.

Posco falls to loss in second quarter as virus hammers steel demand

Song Jung-a in Seoul

Posco, the world’s fifth-largest steel maker, swung to an operating loss in the second quarter as the coronavirus pandemic battered global demand for steel products amid the growing economic fallout.

The South Korean company reported an operating loss of Won108.5bn ($90.6m) in the April-July period, compared with a Won724.3bn operating profit a year earlier. Sales fell 21.3 per cent to Won5.88tn.

But the company expects earnings to improve in the third quarter as steel prices began to recover in June after hitting the bottom in April.

“We plan to improve our profitability by expanding exports to China, where demand is recovering, and by increasing sales of high-value-added products such as auto steel plates and steel products for solar energy production facilities,” said the steelmaker.

Shares in Posco rose 1.9 per cent to Won191,000 on the improving outlook on Tuesday afternoon, while the benchmark Kospi Composite Index gained 1.3 per cent.

UK on course to post record public deficit as pandemic impact hits home

Chris Giles, Economics Editor

The extent of the coronavirus toll on the UK public finances was exposed on Tuesday with official figures showing the government borrowed more in the first three months of this financial year than it did in any full year except two at the height of the financial crisis.

Public sector net borrowing rose to £127.9bn between April and June, an increase of £103.9bn on the same months the previous year and by far the largest cash deficit in a single quarter since records began.

Only in 2009-10 and 2010-11 was the absolute full-year level of borrowing higher as the deficit is expected to be on course to exceed £350bn this year, some 18 per cent of national income.

Public expenditure rose 42 per cent in the three months at the height of the pandemic compared with a year earlier, while tax revenues were 13.2 per cent lower, the Office for National Statistics said.

Care was needed in interpreting the deficit figures, the ONS said, because many of the figures are estimates of the final totals that take some time to collate, but there was little doubt the UK was on course to post a record deficit.

Volvo swings to a loss in the first half of 2020 as car sales slide

Peter Campbell in London

Volvo Cars fell to a SKr1.2bn (£103m) loss in the first six months of the year as the global pandemic dented its car sales by a fifth.

Net income, which was SKr3.4bn (£300m) in the first half of 2019, fell to a loss after revenues slid by 14 per cent to SKr111.8bn (£9.8bn).

Despite the group reopening every major plant aside from its US facility during the second quarter, sales remained sluggish with worldwide demand below levels before the pandemic.

The overall car markets in China and the US fell by a quarter in the six months, while in Europe they dropped by 38 per cent.

Volvo’s sales fell by 20 per cent to 270,000 cars, with the brand gaining market share in China where it “made up much of the ground lost in the first quarter”.

Sales of its “Recharge” plug-in hybrid models also rose by three quarters, accounting for a quarter of all Volvo sales in Europe and one in ten models in the US.

In April the company cut 1,300 white collar jobs from its Swedish business.

“The downturn we saw in the first half is a temporary one,” said chief executive Håkan Samuelsson. “We expect to see a strong recovery in the second half of the year and our Recharge range of electrified cars puts us in a strong position to meet the emerging trends we are seeing.”

UBS reports 11 per cent drop in quarterly profit

Owen Walker in London

UBS’s profits in the second quarter dropped by 11 per cent from a year earlier as strong performance in its investment bank failed to offset expenses set aside for expected soured loans.

The Swiss bank reported $1.2bn of net profit, thanks in part to a 43 per cent surge in profits at its investment bank, reflecting the strong gains reported by Wall Street lenders this month.

But UBS also said it had added $272m of loan loss provisions, bringing its total this year to $540m, as even its wealthy clients proved exposed to the worst effects of the Covid-19 crisis.

The group said it was considering resuming paying dividends and share buybacks towards the end of the year.

“As we continue to face a challenging environment, we are adapting and accelerating the pace of change, supporting our clients, employees, and the economies in which we operate, while remaining focused on our strategic priorities,” said Sergio Ermotti, chief executive.

In April, UBS reported a 13-fold increase in loan loss provisions compared with the same period last year, with expenses for soured loans hitting $268m.

EU-UK trade talks unlikely to bear fruit soon

George Parker in London and Peter Foster in Brighton

Post-Brexit trade talks are set to drag on for months after UK officials admitted that negotiations this week in London — once seen as crucial — were not at “a breakdown or breakthrough point”.

David Frost, Britain’s chief trade negotiator, and Michel Barnier, his EU counterpart, on Monday night dined on guinea fowl and salmon ahead of three days of talks but there was little expectation of progress.

With a focus on fighting Covid-19, few believe exhausted European leaders will want to start thinking about Brexit during August.

Read more here

India recruits volunteers for indigenous vaccine trials

Amy Kazmin in New Delhi

India’s top public hospital, the All India Institute of Medical Sciences, and several other medical institutions have begun to recruit volunteers for the first-phase trials of an indigenously developed coronavirus vaccine, Covaxin.

In the first phase, the vaccine, being developed by the Indian government and Hyderabad-based Bharat Biotech, is due to be tested in 375 volunteers. That is expected to be followed swiftly by the second-phase trial with another 750 volunteers.

India’s prime minister, Narendra Modi, has taken a personal interest in India’s vaccine development, eager for the country — already a major exporter of pharmaceutical products — to prove its capability to produce a vaccine and rapidly roll out its delivery.

The Indian Council for Medical Research, a government entity involved in the development of Covaxin, raised an outcry when its director, Balaram Bhargava, sent out a letter to hospitals saying the government hoped to have the vaccine ready for human use on August 15, India’s independence day, “after completion of all clinical trials”.

The letter — sent to healthcare facilities chosen to participate in the human trials of the drug — said that the development of the vaccine was “one of the top priority projects which is being monitored by the topmost level of the government.”

It further advised them to fast-track any approvals processes required to carry out the clinical trials, adding “kindly note that non-compliance will be viewed very seriously. You are advised to treat this project on the highest priority and meet the timelines without any lapse”.

The commanding tone of the letter prompted a backlash from scientists, researchers and others questioning the ambitious goal of trying to crunch a vaccine trial into just a few weeks.

The IMCR later clarified it was simply to encourage hospitals to cut through red tape to ensure the process moves swiftly.

As India pushes ahead with Covaxin, the privately owned Serum Institute, one of the world’s largest vaccine makers, said it would seek official permission to start phase three trials of the vaccine being developed by Oxford university.

The institute has tied up with AstraZeneca for production of the Oxford vaccine candidate, which has shown promising results in trials, and has committed to produce 400m doses in India if the trial is successful.

Asia-based multilateral lenders offer more Covid-19 assistance

The Asian Infrastructure Investment Bank on Tuesday said it had approved a €45m loan to Georgia to help the Caucasus nation recover from the Covid-19 pandemic.

The Beijing-backed lender said the loan would help Georgia fund reforms planned before the pandemic struck, such as job creation schemes and competitiveness programmes.

The Manila-based Asian Development Bank on Tuesday approved grants to Bhutan and the Maldives to boost the Asian countries’ Covid-19 responses.

ADB will provide $2m to Bhutan and $1m to Maldives for coronavirus test kits and reagents, personal protective equipment, medical supplies and laboratory equipment.

In June, ADB approved $20m in grants and loans to Bhutan, and $50m in a similar package for the Maldives.

Kazakhstan closes popular tourist resorts to curb Covid-19

Kazakhstan has sealed off two popular tourism areas in a bid to curb movement and prevent the spread of coronavirus, official media reported on Tuesday.

Burabay and Zerenda, lakeside resorts 100km apart in the Aqmola region of northern Kazakhstan, will be closed to all visitors from July 24 to August 3, the Kazinform news agency reported.

The tourism ministry blamed the closures on “a low level of civic responsibility among vacationers”.

Kazinform said checkpoints would be set up and hotels prohibited from accepting bookings.

More than 70,000 people have tested positive for Covid-19 in Kazakhstan and 585 people have died as a result of the virus, health ministry data show.

Iraq designer creates mask for fashion-conscious

A model wears a face mask designed to prevent the spread of Covid-19 created by Ziad Tariq, a designer based in the Iraqi city of Basra.

Iraq has been badly affected by the disease, with more than 94,000 people contracting coronavirus, of whom 3,869 have died, according to health ministry data.

At least 88 people died in the 24 hours to midnight on Monday evening.

Last week, authorities eased a nationwide curfew and announced a schedule for reopening international travel.

Singapore’s Temasek reports lowest returns since 2016

Stefania Palma in Singapore

Temasek, Singapore’s state-backed investment company, on Tuesday reported the lowest shareholder returns and the first contraction in its portfolio value since 2016.

According to preliminary data, Temasek’s one-year shareholder return fell to minus 2.28 per cent from 1.49 per cent in 2019, while its net portfolio value tumbled to S$306bn (US$220bn) in the 12 months to March, down from S$313bn last year.

“Rising geopolitical and trade tensions, as a result of increasing nationalism and protectionism, will create more uncertainties for long term investors and asset owners,” said Dilhan Pillay, chief executive officer of Temasek International, the group’s investment arm, in a statement.

“These uncertainties are now exacerbated by the immediate, as well as longer term, impact of Covid-19,” Mr Pillay said, adding he was “pleased” with the company’s performance “despite the sharp correction due to Covid-19”.

Temasek, one of the world’s biggest institutional investors, has delayed the release of its audited numbers to September due to the pandemic.

“The group consolidation process can only start when all financial statements from portfolio companies have been received,” the company said.

EU leaders strike deal on €750bn recovery fund after summit

Sam Fleming, Jim Brunsden and Mehreen Khan in Brussels

EU leaders have struck a deal on a landmark coronavirus recovery package that will involve the European Commission undertaking mass borrowing for the first time.

After days of sometimes bitter debate, the heads of governments meeting in Brussels agreed on a €750bn package to fund post-pandemic efforts to rebuild EU economies.

The deal was announced in a tweet from Charles Michel, the European Council president, while Emmanuel Macron, the French leader, called it a “historic day for Europe”.

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Hongkongers use pandemic as excuse to raise cash

Hong Kong residents have turned to selling secondhand items on online marketplaces during the pandemic, with the average seller making as much as HK$4,400 ($570) on just one platform, Carousell.

The Singapore-based Carousell said its users in the city made around 19 per cent more from selling on the platform from February to June compared to the September to January period.

“In February to June, Hongkongers … made more than 860,000 transactions for secondhand items to earn extra money, whether it was to save for rainy days, supplement income, or even to cushion the blow of losing a job,” the company said.

Women’s fashion and electronics were among the most popular, along with pandemic-related items such as office furniture for use in the home.

Carousell is popular in the city with people often seen exchanging goods in Mass Transit Railway stations.

Hong Kong has so far avoided a strict lockdown, meaning residents are free to travel to other parts of the city to pick up their items.

Julius Baer profits soar as turbulence lifts trading

Owen Walker in London

Heavy trading by ultra-wealthy clients helped Julius Baer achieve record profits in the first half of the year.

The Swiss private bank announced on Monday SFr491m ($523m) of net profits, up 43 per cent year on year, while earnings per share rose 45 per cent to SFr2.28.

The results are an early indication of how Swiss banks dedicated to serving rich clients performed in the coronavirus-induced crisis. UBS reports quarterly results on Tuesday, while rival Credit Suisse will publish on July 30.

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Global stocks gain on stimulus and vaccine hopes

Hudson Lockett in Hong Kong

Global stocks rose on Tuesday as top officials in Europe and the US made strides towards securing extended economic support packages and sentiment got a boost from promising results in the first phase of clinical trials for a coronavirus vaccine.

Hong Kong’s benchmark Hang Seng index rose 1.5 per cent, while Sydney’s S&P/ASX 200 climbed 1.1 per cent and Japan’s Topix rose 0.1 per cent.

The gains in Asia-Pacific trading came after a solid day on Wall Street saw the S&P 500 climb 0.8 per cent while the Nasdaq Composite jumped 2.5 per cent to a record high, after the White House signalled it would open talks for $1tn in supplemental aid.

US stocks also received a shot in the arm from a study published on Monday showing that a vaccine developed by Oxford university and AstraZeneca showed promising results in the first phase of its clinical trials.

Futures tipped the S&P 500 to rise 0.1 per cent when trading on Wall Street begins later in the day.

In Europe equity markets were poised to open slightly higher after EU leaders suggested they were close to striking a deal on a landmark €750bn economic recovery package that will involve the European Commission undertaking mass borrowing for the first time.

Attendees at the EU meeting included, from left, Greek prime minister Kyriakos Mitsotakis, Spanish prime minister Pedro Sánchez and German chancellor Angela Merkel.

Both the FTSE 100 and Europe Stoxx 50 were set to gain 0.2 per cent.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 0.2 per cent despite the US commerce department’s move to add 11 Chinese companies to an economic blacklist over alleged use of forced labour by Uighurs in the western province of Xinjiang.

Oil prices edged higher, with Brent crude, the international benchmark, up 0.2 per cent at $43.35 a barrel. US marker West Texas Intermediate was up by the same degree at $40.87.

New coronavirus case rate appears to slow in New Delhi

Amy Kazmin in New Delhi

New confirmed coronavirus infections in India’s capital, New Delhi, fell below 1,000 cases in a 24-hour period for the first time since early June, suggesting the disease may have peaked in the hard-hit city.

Nationally, India added a total of 36,800 new cases in the last 24 hours, and 596 new fatalities bringing the country’s total death toll to 28,099, including more than 100 doctors.

The spread of the virus has accelerated in other parts of the country, including poorer states with weak health infrastructure.

New Delhi was overwhelmed by a surge of cases early June, with accounts of critically ailing patients in desperate need of care turned away from numerous overcrowded hospitals, and in some cases, literally dying on the doorstep.

At the time, the city detected around 4,000 new infections every day. But new cases fell to just 954 on Monday — the first time since June 1 that they were below the 1,000 case mark — suggesting the worst may be over for the capital.

However, experts have cautioned that the encouraging numbers may also reflect the city’s growing reliance on rapid antigen tests, which are known to deliver high levels of false negatives compared to the more reliable RT-PCR tests. In theory, patients who test negative by the antigen tests are supposed to be retested, but only a fraction ever are.

Meanwhile, cases are surging in the state of Bihar — one of the country’s poorest states — where hospitals are struggling to cope with an onslaught expected to intensify in the coming weeks.

The southern state of Andhra Pradesh is also witnessing rapid growth in coronavirus patients, and now has the fifth-highest caseload of any Indian state.

Zimbabwe journalist arrested after Covid-19 exposé

Joseph Cotterill in Johannesburg

Zimbabwe’s security forces have detained a prominent journalist who exposed the alleged illegal awarding of contracts in pandemic-related government procurement.

Hopewell Chin’ono, whose revelations led to the arrest and sacking of the country’s health minister, was arrested by security agents who raided his home in the capital, Harare, on Monday.

“I have locked myself inside. They are outside . . . alert to the world for me,” Mr Chin’ono said, before posting a video of agents arriving to take him away on Facebook.

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Victoria reports 374 new cases ahead of mask rule

The Australian state of Victoria recorded a continuing surge in new coronavirus cases, accounting for 374 of the 387 new cases announced in Australia on Tuesday.

The new infections come a day before the wearing of masks outdoors becomes mandatory in the state capital, Melbourne, and a neighbouring municipality.

Victoria’s premier, Daniel Andrews, said the state’s residents need to do more in terms of restricting movement and enforcing physical distancing to prevent the spread of the virus.

“There are a lot of emotions and a lot of challenges,” he said.

Three more people died in Victoria overnight, including a centenarian.

Victoria has launched an official inquiry into the new wave of infections, which officials have said was most likely caused by deliberate breaches of hotel quarantine procedures.

New South Wales, which has closed its border with neighbouring Victoria, recorded 13 new cases on Tuesday, none of which are believed to have an interstate source.

Designers fail to resist catwalk’s lure at ‘digital’ fashion week

Alexander Fury in Milan

Milan’s first allegedly “digital” fashion week ended on Friday. Allegedly, because despite hurrah-ing the online future of the catwalk, Etro and Dolce & Gabbana both hosted physical shows, attended by media, influencers and local celebrities.

Economies are tanking, luxury takings are down and fashion brands are closing stores and cutting staff, and face coverings while shopping in the UK will be mandatory.

Which is why there was something not only incongruous but downright disconcerting about seeing designers such as D&G, pictured, attempting to keep calm and catwalk on.

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New Zealand sounds alarm over plunge in testing rates

Officials in New Zealand are concerned by a recent fall in community testing since the country’s Covid-19 lockdown ended on June 8.

In recent weeks, testing has hovered at about 1,000 daily, far lower than the government’s target.

The country’s director-general of health, Ashley Bloomfield, said on Tuesday that one reason for the decline in testing was that rates of influenza-like symptoms are lower than usual, as a result of the lockdown.

Dr Bloomfield also said tests drop off during school holidays.

He had asked the country’s college of general practitioners to survey the reasons for people refusing a test, which had increased since the lockdown.

Dr Bloomfield said he was concerned about the fall in community testing after seeing the recent surge in the Australian state of Victoria.

“We have seen in Melbourne how small breaches lead to disastrous consequences,” he said. “Just a few cases led to a widespread outbreak.”

New Zealand’s prime minister, Jacinda Ardern, said on Monday that the cabinet wanted to see the weekly rolling average of testing rise to 4,000 per day.

Higher testing levels, she said, would offer reassurance that Covid-19 was not in the community.

China reports 8 new local cases as Xinjiang outbreak grows

Health authorities in China reported eight new local coronavirus cases in the country to the end of Monday as an outbreak in the western region of Xinjiang continued to grow.

The new cases in Xinjiang, home to the Uighur ethnic minority, take the infection tally recorded since last Wednesday to 55.

Officials have put Xinjiang’s capital, Urumqi, on a “wartime” footing, locking down residential areas and barring non-essential travel in a bid to limit the spread of the virus.

Three imported cases reported on Monday take the country’s overall Covid-19 tally to 83,693.

Separately, Beijing reported a 15th consecutive day of no local cases following an outbreak in early June that was thought to be linked to a wholesale food market.

Chevron to buy Noble Energy in $13bn all-share deal

Derek Brower, Myles McCormick and David Sheppard in London
and James Fontanella-Khan in Pavia

Chevron has agreed to buy Noble Energy for $13bn, including debt, in the oil and gas industry’s first big deal since geopolitical tensions and the global pandemic sparked this year’s crude price collapse.

Under the terms of the all-share tie-up, which values the independent oil and gas producer’s equity at $5bn, investors will receive 0.1191 shares in the supermajor for each one they hold in its smaller US rival.

The acquisition is expected to trigger a string of deals in the oil sector as deep-pocketed groups such as Chevron and ExxonMobil lead a wave of consolidation across the heavily indebted US shale patch.

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South Korea exports set for 5th straight monthly decline

Edward White in Wellington

South Korean exports are tracking for a fifth consecutive month of declines as the coronavirus pandemic batters global demand, according to preliminary statistics released in Seoul on Tuesday.

The value of shipments from Asia’s fourth-largest economy dropped 13 per cent in the first 20 days of July following on from a double digit drop in June, according to the data from the Korea Customs Service which is seen as an early bellwether for regional trade.

The IMF has forecast South Korean gross domestic product to contract 2.1 per cent this year, while the Bank of Korea expects a drop of more than 0.2 per cent.

In response to the global economic downturn the government in Seoul has announced stimulus measures of around $230bn as well as a further $130bn five-year spending plan announced last week aimed at creating 1.9m jobs by 2025.

China devours Australia resources despite souring ties

Jamie Smyth in Sydney

Australia has been shielded from an even worse Covid-19 economic downturn by a record demand for resources from China, despite the souring of diplomatic relations between Canberra and Beijing.

Keith Pitt, Australia’s minister for resources, told the Financial Times that the mining and energy sectors were underpinning the domestic economy, which has been battered by a second wave of Covid-19 that has forced many businesses in Melbourne to shut again for several weeks.

“Resources have been a shining light of Australia’s economic story. The sector has managed to keep pretty much all its people employed and engaged — and that’s over 240,000 direct jobs,” said Mr Pitt.

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Asia equities follow US higher as vaccine tests boost optimism

Stock markets in Asia-Pacific rose on Tuesday after optimism over positive results from a vaccine trial boosted global markets and as investors eyed EU and US recovery packages.

The Topix in Japan and Australia’s S&P/ASX 200 each gained 0.2 per cent while South Korea’s Kospi added 1 per cent.

S&P 500 futures were down 0.1 per cent.

Overnight on Wall Street, the S&P 500 closed up 0.8 per cent and a rally in technology shares pushed the Nasdaq Composite 2.5 per cent higher to end at a record level.

Investors are also awaiting agreements on coronavirus rescue packages by the EU and the US. Charles Michel, the European Council’s president, has proposed sweeteners to “frugal” EU member states in a bid to resolve the deadlock over the bloc’s coronavirus recovery plan.

The Trump administration voiced its support for $1tn in supplemental aid to help the economy weather the pandemic, but said it opposes a renewal of enhanced unemployment benefits.

Argentina bondholders team up on new restructuring proposal

Colby Smith in New York and Benedict Mander in Buenos Aires

Argentina’s biggest bondholders have put forward a new proposal to restructure $65bn in foreign debt, in the hopes of breaking a months-long impasse with the government.

On Monday, the three largest bondholder groups said in a joint statement that they would submit an offer that included “significant economic and legal concessions”. 

The updated terms suggest a recovery value of about 55 cents on the dollar, a bigger concession from the roughly 60 cents on the dollar initially requested.

In a Financial Times interview, Alberto Fernández, Argentina’s president, appealed for the world to accept that — with an economy devastated by coronavirus — Buenos Aires could not budge from its final offer.

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US reports its smallest new-case rise in a week

Peter Wells in New York

The US reported its smallest increase in new coronavirus cases and deaths in a week as a number of hotspot states revealed numbers that had pulled back from recent highs.

A further 57,948 people in the US tested positive for coronavirus over the past 24 hours, according to Covid Tracking Project data, from nearly 64,000 on Sunday and about 19,300 fewer than the record jump on July 17.

Florida (10,347) had the biggest increase, reporting its sixth straight day of more than 10,000 cases, but down about one-third from its July 12 record of 15,300.

Texas (7,404) had the next biggest increase, followed by California (6,846), which reported its smallest one-day increases in coronavirus cases in two weeks. There was a record jump of 3,186 in Louisiana.

Figures on Monday tend to be lower than other days of the week, owing to weekend delays in reporting.

While the overall increase in the US was below 60,000 for the first time in a week, 16 states reported single-day increases of more than 1,000 cases on Monday, according to Financial Times calculations using Covid Tracking Project data, just two a record 18 states on July 17.

A further 365 people died from Covid-19 over the past day, compared with 523 on Sunday and levels of more than 800 from the middle of last week onwards.
Florida (92) reported the highest number of fatalities on the day.

A further 62 deaths in Texas pushed its total since the pandemic began to 4,020 and over 4,000 for the first time.

EU leaders close in on €750bn Covid-19 recovery deal

Sam Fleming, Jim Brunsden and Mehreen Khan in Brussels

EU leaders are closing to striking a deal on a landmark coronavirus recovery package that will involve the European Commission undertaking large-scale borrowing for the first time, as they attempt to relaunch the bloc’s recession-struck economies.

After days of at times bitter debate, EU leaders have hammered out the bulk of a €750bn package intended to fund post-pandemic reconstruction efforts in hard-hit parts of the EU, according to multiple people familiar with the talks.

Barring last minute hitches, it will centre on a €390bn programme of grants to economically weakened member states, a smaller sum than the €500bn package originally proposed by Berlin and Paris back in May. Alongside this, leaders are poised to sign off on the EU’s next seven-year, €1tn budget.

The deal, orchestrated by German chancellor Angela Merkel and European Council President Charles Michel, would be the fruit of marathon negotiations that have been under way in Brussels since Friday morning.

NYC to keep kindergarteners online, says mayor

New York City has no plans to fully reopen kindergartens, despite steps to resume in-person learning elsewhere, such as in China and Israel.

Mayor Bill de Blasio said on Monday that the city would maintain a cautious approach to education.

“There’s a lot of people in Israel, in a small country, but nowhere near the kind of density we’re talking about here,” he said at a news conference. “So, I think our approach would be particularly cautious.”

Mr de Blasio said the city would continue with a “blended” approach to education – a mixture of days online and days at school.

State officials are expected to make decisions on whether school districts can reopen in the first week of August, based on average daily infection rates.

Southwest Airlines plans to shed 7% of its workforce

Claire Bushey in Chicago

More than a quarter of the workforce at Southwest Airlines workforce has volunteered to take a buyout or extended leave as the company scales back in the face of diminished demand.

Nearly 4,400 employees agreed to take a severance package, while about 12,500 agreed to take voluntary extended leave, chief executive Gary Kelly said in a message to employees on Monday.

Southwest has 60,800 employees, so the buyouts will reduce the workforce by 7 per cent.

US airlines are preparing to reduce headcounts because Covid-19 cratered demand for air travel. While US demand rebounded in May and June, it has since stalled.

The US Transportation Safety Administration reported that traffic for the week through July 16 was down 75 per cent compared to a year earlier. The previous week, it had only been down by 72 per cent.

American and United have sent furlough warnings to tens of thousands of employees, while about 17,000 employees at Delta will take early retirement.

Southwest’s lower cost structure and debt burden, as well as limited exposure to international routes, give it advantages over competitors.

Oxford university vaccine shows promise in trial

Anna Gross and Clive Cookson in London

A coronavirus vaccine being developed by Oxford university in collaboration with AstraZeneca has shown promise in an early trial.

The vaccine generated “robust immune responses” and was “tolerated” among patients in the study, AstraZeneca said on Monday.

The trial, which involved 1,077 healthy adults, induced a strong antibody and T-cell response for at least 56 days, a positive indication that the immunisation could be effective in preventing disease.

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News you might have missed

A cluster of coronavirus cases has been found at a US-owned Scottish call centre carrying out test-and-trace work for NHS England. The discovery of six cases at the facility operated by outsourcing company Sitel in North Lanarkshire near Glasgow comes amid a rise in reported weekend infections of Covid-19 in Scotland.

Donald Trump backed mask-wearing as “patriotic” in a post on Twitter on Monday, as federal officials step up efforts to encourage Americans to don face coverings in public. The US president will lead a White House coronavirus task force briefing for the first time in nearly three months, at 5pm on Tuesday.

US stocks advanced on Monday as investors gauged upbeat developments in a vaccine trial and the latest in negotiations for additional fiscal support amid fallout from the pandemic. Wall Street’s S&P 500 closed 0.8 per cent higher on strong gains in the consumer discretionary sector. A rally in technology shares powered the Nasdaq Composite to a record closing high.

Chicago will reintroduce restrictions on bars, restaurants and gyms and limits to personal gatherings following a recent increase in coronavirus in the city. From July 24, bars without a food licence will no longer be able to serve alcohol indoors, while the maximum party size at restaurants and pubs will be reduced to six people.

IBM’s revenue dropped 5.4 per cent in the second quarter, as the coronavirus crisis led companies to cut back spending on traditional applications and systems and shift a bigger slice of their IT budgets to the cloud. The US technology supplier said it had seen some benefit from the swing in IT spending, with a 34 per cent jump in its own cloud revenue to $6.3bn.

UK retailer Marks and Spencer plans to cut nearly 1,000 jobs as the disruption wrought by coronavirus puts pressure on its profits. The FTSE 250 company said on Monday that the 950 job cuts would affect office support staff as well as store and property managers, adding they would cut down on role duplication.

Halliburton posted a net loss of $1.7bn in the second quarter and took a write down of $2.1bn as the crash in crude prices causes work to dry up in the oil field services sector. The results mark the third straight quarter of losses for the company — one of the world’s biggest oil field services providers.

Bauer Media said it would close its Q music magazine and nine other titles.
The German company will shut down the Modern Classics car magazine, while Sea Angler, Car Mechanics and Your Horse have been sold to UK publisher Kelsey Media. Q editor Ted Kessler wrote on Twitter: “The pandemic did for us and there was nothing more to it than that.”

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