UK spends £100m on new vaccine facility
The UK government has spent £100m on a manufacturing facility in Essex to scale up production of a Covid-19 vaccine, as a growing number of pharmaceutical companies report promising results in early-stage trials.
The money will be used to accelerate production of a successful Covid-19 vaccine to meet domestic and international demand, as countries rush to boost supplies for an unprecedented worldwide immunisation programme.
The manufacturing site, purchased from the genetics, health and nutrition company Benchmark Holdings, will have capacity to produce millions of vaccine doses per month, for both Covid-19 and future diseases, according to the government.
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When will we have a Covid-19 vaccine? Live Q&A
Several potential Covid-19 vaccines have reached significant progress markers in the past two weeks.
But what do these results mean for the viability of a vaccine?
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UN’s Guterres calls for industry bailouts to follow green principles
Anna Gross in London
UN Secretary General António Guterres has urged nation states to make sure that industry, aviation and shipping bailouts prompted by the Covid-19 pandemic are aligned with the Paris Agreement on climate change.
“Paris goals are slipping out of reach,” Mr Guterres said on Thursday, adding that the “time for small steps has passed”.
“Transformational change” was needed, the former Portuguese prime minister said in an address to Tsinghua University in China. The Covid-19 pandemic should “erase any doubts” about whether that kind of change was possible, he said.
“How this money is spent can either serve as a slingshot to hurtle climate action forward, or it can set it back many years, which science dictates we cannot afford,” he said.
He called on countries to create green jobs and sustainable growth and to consider climate-risk in all decision making.
As an economic superpower, the way that China chose to restore growth would have a big impact on whether 1.5 degrees of planetary warming could be kept within reach, he said.
Mnuchin implies extension of pandemic jobless benefits possible
James Politi in Washington
Steven Mnuchin, the US treasury secretary, said Republicans would consider extending emergency jobless benefits as long as they replaced 70 per cent of workers’ lost wages as part of a $1tn fiscal stimulus package that is being negotiated on Capitol Hill.
In an interview with CNBC on Thursday, Mr Mnuchin said the Trump administration and senior leaders of his party would support the renewal of federal unemployment payments as long as they were reduced from their current level of $600 per week, which Republicans believe discourage people from returning to work.
Democrats have suggested extending them at current levels, given the high levels of unemployment afflicting the US economy.
Mr Mnuchin made the comments after talks with Republican leaders to reach a consensus on their stimulus plan, which has triggered a backlash from rank-and-file conservatives within the party, complicating the effort.
Democrats have proposed an additional $3tn of stimulus. They contend that the Republican plan will fall short of what is needed given that a flare-up in coronavirus cases has slowed any bounceback in the US.
Mr Mnuchin has for many weeks doubted the need for no additional stimulus. But he said Donald Trump wanted to send money out to families as quickly as possible, including another round of direct payments in August.
The US Treasury secretary said that while the price tag of the current bill being discussed would be about $1tn, the White House was open to yet another round of fiscal stimulus if needed.
US initial jobless claims rise for first time since March
The number of Americans filing for initial unemployment benefits has levelled off near 1.4m, as Covid-19 outbreaks in parts of the US south and west stoke concerns that the labour market’s recovery could stall.
New jobless claims came in at a seasonally adjusted 1.42m last week, compared with 1.31m a week earlier, the US Department of Labor said on Thursday. Economists had forecast that claims would match the previous week’s unrevised figure of 1.3m.
It was the first time since early in the crisis that weekly applications for benefits have risen. The pace of first-time claims had gradually eased in each of the preceding 15 weeks since hitting a high of 6.9m in March. Weekly claims remain elevated, having hit a peak of 669,000 during the 2008-09 financial crisis.
New claims in the Pandemic Unemployment Assistance programme, which extended aid to the self-employed or other individuals who would not qualify for regular unemployment compensation, rose to 974,999 from 955,272 on an unadjusted basis.
The number of Americans currently receiving jobless benefits dropped to 16.2m from 17.3m during the week that ended on July 11. Continuing claims were equivalent to 11.1 per cent of the workforce. This so-called insured unemployment rate, which was 11.8 per cent the week before, is considered an alternative measure of joblessness.
Continuing claims have fallen for seven weeks running, and are down from 20.3m in the first week of June and a peak of 24.9m in May.
AT&T revenues fall as pandemic hits media business
Nic Fildes and Alex Barker
America’s second-largest telecoms company reported a 9 per cent slide in second-quarter revenue as the impact of the coronavirus pandemic on its media and phone businesses led to a $830m hit to its business.
AT&T, which owns HBO, said that its quarterly revenue dropped to $41bn as its operating income more than halved to $3.5bn from $7.5bn in the same period a year earlier.
The results reflected a blow to its business from the pandemic. AT&T said the disruption cost it $320m in the three months in the form of compensation to front line employees that were not able to work and disruption to media production. It also booked a larger $510m charge reflecting the hit to advertising revenue, the closure of movie theatres, the cancellation of sporting events as well as lower mobile roaming and phone sales during the quarter.
The revenue decline was in line with expectations although growth in new mobile subscribers undershot forecasts.
The relatively modest take-up of HBO Max, which was launched with some fanfare in May, will be a blow to AT&T’s Warner Media division, who see the service as the digital shop window for its best content. HBO revenue declined 5 per cent to $1.6bn and the overall HBO subscriber base, including the Max streaming platform, grew to 36.3m from 34.6m at the end of 2019.
Netflix, one of the big beneficiaries of the lockdown economy, added 10m subscribers in the second quarter, taking its global subscriber close to 200m.
“Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet,” said John Stankey, AT&T chief executive, who was appointed in April.
Users flock to Twitter but marketers remain cautious
Tim Bradshaw in London
Twitter’s usage surged during the coronavirus pandemic and civil rights protests, adding 20m new daily users in its second quarter from the previous three months, but sales still fell as the internet group warned of a choppy advertising market.
Revenues dropped 19 per cent year on year to $683m, representing a less steep decline than in the March quarter, but still short of Wall Street’s consensus expectations of about $700m for the three months ending in June.
While Twitter pointed to a “moderate recovery in advertising demand” since March’s turbulence, it said that many brands pulled back their spending again from mid-May to late June during the Black Lives Matter protests. Advertising revenue was down 15 per cent year on year in the last three weeks of June.
In its second quarter, Twitter swung to a net loss of $1.2bn, primarily due to a deferred tax asset valuation and other non-cash expenses. Without those one-offs, Twitter said that its adjusted net loss was $127m, compared with $37m in adjusted net income in the same period last year.
Still, Twitter’s shares jumped as much as 6 per cent in pre-market trading on Thursday as it reported that average monetisable daily active users rose 34 per cent year on year to 186m, far ahead of most analysts’ estimates.
Jack Dorsey, Twitter chief executive, credited product improvements and news-driven usage for the accelerated growth.
A fall in advertising pricing outweighed the increased engagement, but Twitter said it had completed a vital IT system upgrade that should strengthen its offering to marketers.
American Airlines posts $2bn loss and warns of ‘unpredictable’ times
Claire Bushey in Chicago
American Airlines posted a second consecutive quarterly loss and said on Thursday that it expects capacity to be down 60 per cent in the current quarter compared to last year.
The Fort Worth, Texas airline’s revenue fell 86 per cent to $1.6bn, just ahead of analyst expectations for $1.4bn. It posted a net loss of $2.1bn and an adjusted loss of $7.82 a share, worse than analysts’ expectations for a loss of $7.70.
The carrier slowed its cash burn during the quarter, but it still averaged $55m per day, above competitors Delta and United airlines.
“The current environment is more unpredictable and more volatile than anything we ever could have imagined,” chief executive Doug Parker and president Robert Isom wrote in a memo to staff. “But we know adversity creates opportunity, and we remain confident we will emerge from this crisis in a strong competitive position.”
The pandemic triggered a worldwide collapse in demand for air travel as governments imposed stay-at-home orders and border restrictions, and passengers feared contagion. Demand at US carriers has rebounded a little from the April low but it sputtered this month, still far below traffic numbers for last year. Airlines are touting their cleaning policies and, in some cases, their policy of blocking middle seats, to entice passengers back to the skies.
American has warned 25,000 employees they could be furloughed after September 30, an increase over the initial forecast of an “excess” headcount of 20,000
Dow to lay off more than 2,000 employees as virus saps demand
Myles McCormick in London
US chemicals and plastics giant Dow will cut more than 2,000 jobs in an attempt to lower costs as the Covid-19 pandemic slashes demand for its products.
The $33bn industrials group – spun out of DowDupont last year – on Thursday said it would look to cut operating expenses by a further $150m this year and improve earnings before interest, tax, depreciation and amortisation by $300m through job cuts and the offloading of “uncompetitive” assets.
“While these are difficult decisions, they are necessary to maintain competitiveness while the economic recovery gains traction,” said Jim Fitterling, Dow’s chairman and chief executive officer.
The company said increased demand for its chemicals in areas that have done well during the lockdowns – such as food packaging and pharma — was not enough to offset a sharp drop in demand for those used in larger items – such as cars and washing machines.
The company on Thursday announced a 24 per cent drop in net sales to $8.4bn in the three months to June. It posted a net loss of $217m, down from a profit of $90m in the same period last year. Both figures were slightly better than analysts had anticipated, according to estimates from S&P Capital IQ.
Mr Fitterling said Dow’s restructuring would involve a 6 per cent reduction in its workforce. The company had 36,500 full-time employees at the end of 2019.
Dow was optimistic about the prospects of a recovery, however, and said demand had begun to bounce back in most industries in June. “The growing recovery in China and early signs of improvement in western Europe are positive indicators for the United States and Latin America,” said Mr Fitterling.
Ann Taylor owner files for bankruptcy protection
The womenswear group behind the Ann Taylor and LOFT brands has become the latest US retailer to file for bankruptcy protection after the coronavirus shutdown pushed the heavily indebted company over the edge.
Ascena Retail, which has about 2,800 outlets and 50,000 full and part time workers, outlined plans to wipe out $1bn worth of debt and shut stores as it filed for Chapter 11 protection in Virginia federal court on Thursday.
It is the latest sign of distress among discretionary US retailers as they try to recover from the shock of the lockdown. Brooks Brothers this month sought court protection from creditors, following companies including J Crew, JCPenney and Neiman Marcus, which filed earlier in the pandemic.
In the latest blow to bricks and mortar retail, Ascena said on Thursday it would reduce a “significant number” of stores operated under Justice, the children’s clothing chain, and all those of Catherines, the plus-sized brand.
The company also intends to close a “select number” of stores operated under the Ann Taylor, LOFT, Lane Bryant and Lou & Grey brands, including the closure of all stores in Canada and Mexico.
Southwest Airlines struck hard by heavy pandemic toll in US
Southwest Airlines said an early pick-up in air travel demand fizzled out this month as the coronavirus pandemic intensified in the US to make it the world’s worst affected nation.
Weak demand for air travel sent the world’s largest low-cost airline to a second-quarter net loss of $915m, compared with a profit of $741m a year earlier. Excluding special items the quarterly net loss for the three months ended June 30 came to $1.5bn, while operating revenue fell 83 per cent to $1bn.
“Improving trends in revenue and bookings have recently stalled in July with the rise in Covid-19 cases,” Gary Kelly, chief executive, said in a statement on Thursday.
The share price rose 1.5 per cent in pre-market trading, as the results were slightly ahead of analyst expectations.
The coronavirus pandemic has devastated the airline industry this year, grounding most flights.
Operating revenue for July is expected to decline from the previous year by up to 75 per cent while capacity will drop to about 30 per cent.
The airline boss said Southwest was “encouraged by improvements in May and June leisure passenger traffic trends, compared with March and April”, but this month the pandemic has ravaged the US. America has reported more than 143,000 coronavirus deaths and nearly 4m cases in total.
The low-cost US airline has been buffeted by the pandemic this year, compounding problems arising from Boeing’s grounding of its 737 Max aircraft last year. The carrier is the largest US-based operator of the aircraft with 31 jets.
“We expect air travel demand to remain depressed until a vaccine or therapeutics are available to combat the infection and spread of Covid-19,” Mr Kelly said. The airline plans to adjust its flight timetable “aggressively”, he added.
The quarter meant restructuring its route network and adding cleaning procedures and social distancing measures and face masks. The company is limiting seats sold until at least October, with the middle ones empty.
Emirates to cover Covid-19 medical and quarantine costs for passengers
Simeon Kerr in Dubai
Dubai’s Emirates has become the first airline to say that it will cover medical expenses and quarantine costs for all passengers should they contract coronavirus while travelling away from home.
The government-owned carrier said on Thursday it would pay for medical treatment up to €150,000 and quarantine expenses of €100 a day for two weeks.
“We know people are yearning to fly as borders around the world gradually reopen, but they are seeking flexibility and assurances should something unforeseen happen during their travel,” said Sheikh Ahmed bin Saeed Al Maktoum, Emirates’ chairman.
The cover, valid for 31 days after departure, is effective immediately and lasts until the end of October.
Emirates, a long-haul specialist, has suffered from global travel restrictions and soft demand, cutting salaries and laying off pilots and cabin crew. The carrier is reopening its route network and currently serves more than 60 destinations.
European equities gain as dollar extends its slide
European stocks advanced on Thursday, as state aid and promising vaccine developments outweighed an escalation in US-China tensions.
The continent-wide Stoxx 600 rose 0.7 per cent, clawing back some of its losses from a day earlier. Frankfurt’s Xetra Dax added 0.8 per cent, while London’s FTSE 100 rose 0.6 per cent.
The breakthrough on an EU pandemic recovery fund and positive results from clinical trials for potential coronavirus vaccines at the start of the week gave investors reason to cheer. However, a diplomatic row between the two superpowers and the spread of Covid-19 in many parts of the world damped enthusiasm.
The US dollar extended its decline towards its September 2018 low, as real yields on US Treasuries hit their lowest level since 2012. The dollar slipped 0.1 per cent against a basket of currencies.
BA pilots to vote on pay and redundancy package
Peggy Hollinger in London
British Airways pilots are to vote at the end of the month on a package of pay cuts and voluntary redundancies after months of tough talks over the airline’s threat to “fire and rehire” thousands of staff.
Balpa, the pilots’ union, has recommended that pilots accept the proposals that include voluntary working, an initial 20 per cent pay cut and the creation of a standby pool of 300 pilots on reduced pay who will return to flying when aviation recovers from the severe downturn caused by the coronavirus pandemic.
The union said the agreement reduced the number of compulsory job cuts from 1,255, out of a total pilots workforce of 4,300, to 270. There will be no “fire and rehire”, the union said.
Brian Strutton, Balpa general secretary, said it was “hugely disappointing” that British Airways had not accepted all of its proposals to eliminate compulsory job losses.
“As a result there will be some compulsory redundancies among the pilot community and that is a matter of huge regret,” he said. “Given BA’s intransigence we have put together the best package we can to save as many jobs as possible.”
International Airlines Group, parent to British Airways, welcomed the announcement of a consultative ballot on the agreement.
BA last month announced plans to cut some 12,000 jobs across the business.
French manufacturers’ optimism bounces off 11-year low
Federica Cocco in London
Confidence among French manufacturers picked up from the 11-year low it hit in April when the government imposed a total lockdown in its efforts to stem the spread of Covid-19.
The manufacturing business climate index rose to a lower than predicted 82 in July, from 77 a month earlier but still “far below” its long-term average of 100, the national statistics agency said on Thursday. A Reuters analyst poll put expectations at 85 this month.
Sentiment remains gloomy in all sectors that the indicator tracks. Business executives in the agrofood sector however are more buoyant than they were in 2009 at the height of the financial crisis, Insee said.
Repsol reports heavy loss after fall in oil and gas prices
Anjli Raval in London
Spanish oil and gas company Repsol posted a loss on Thursday, with the company signalling a bleak second quarter for the industry that has been battered by the coronavirus pandemic.
The €258m adjusted net loss came after “an unprecedented situation caused by the coronavirus led to a historic fall in oil and gas prices”, Repsol said.
This is down from a profit of €497m a year ago but it beat analysts’ estimates of a loss of €284m.
The Madrid-based company re-evaluated the long-term price outlook in light of the crisis, which has prompted it to slash the value of its assets by €1.3bn.
This comes after Repsol had already announced a string of impairments late last year as it said it was overhauling its business as it became a net zero emissions company.
Repsol said it would reduce its operational spending by €450m, higher than previous targets for €350m. Capital spending will also fall by another €100m.
The company was trying to save €2.2bn this year as part of a “resilience” plan with the savings target now increasing by a further €200m.
Daily Mail owner DMGT hit by sharp drop in advertising revenues
Advertising across the news titles of DMGT, the owner of the Daily Mail and Metro, fell by 45 per cent in the third quarter, a sign of the harsh revenue squeeze on print and digital publishers during the lockdown.
Underlying revenues at the media group — which spans news titles, events and data businesses — were down by 23 per cent to £241m in the three months to June 30, with only its insurance and education divisions showing any gains.
DMGT said that all its divisions besides its events business “operated profitably” in June, with an “improving trend” for its news titles. But the group was unable to give formal guidance for its fourth quarter, saying only that the outlook “remained uncertain”.
The news division — which includes the Mail titles, Metro and the newly acquired ‘i’ newspaper — were hit particularly hard by what it described as a “pronounced reduction in advertising revenues across both print and digital formats”.
Even as the digital audience for MailOnline, one of the world’s biggest English language news websites, grew by 37 per cent in the quarter, online advertising revenues fell. While print ad revenues plunged by 67 per cent during the quarter, digital advertising also fell by 17 per cent. DMGT said it “remained confident in future growth opportunities at MailOnline”.
The coronavirus crisis hit other DMGT business divisions hard. Events revenues fell 94 per cent, while its property information division was down by 28 per cent, with the Landmark group in the UK hit particularly hard. It warned that despite the recent pick-up in UK property market activity, it may “take time” for the market to recover and feed through into Landmark’s revenues.
Unilever beats forecasts on strong sales of hygiene products
Unilever suffered less than expected from lockdowns in the second quarter, as high demand for hygiene products helped to offset a decline in those linked with going out, from personal care to ice cream.
Underlying sales at the maker of Hellmann’s mayonnaise, Domestos bleach and Ben & Jerry’s ice cream dipped 0.3 per cent, much better than analysts’ expectations of a 4.3 per cent decline.
Graeme Pitkethly, chief financial officer, said the small dip masked “record growth and record declines” in different product categories as consumer habits shifted radically during the pandemic.
“The performance during this really difficult period, probably the toughest that we’ve ever seen, in the second quarter has . . . demonstrated the resilience of the business,” Mr Pitkethly said.
“We really do believe that talk about a quick recovery is at the optimistic end of the range,” he added.
Futures suggest mild gains for European stocks as volatility persists
European stocks were set to edge higher, as state aid and promising vaccine developments outweighed an escalation in US-China tensions.
Futures for the Stoxx 600 were up 0.5 per cent on Thursday, suggesting that the region-wide index would claw back some of its losses from a day earlier. London’s FTSE 100 was tipped to rise by 0.2 per cent.
The breakthrough on an EU pandemic recovery fund and promising vaccine news at the start of the week gave investors reason to cheer. However, a diplomatic row between the two superpowers and the spread of Covid-19 in many parts of the world damped enthusiasm.
Chinese stocks were rocked by Washington ordering on Wednesday the closure of the country’s consulate in Houston over spying concerns, which drew condemnation from Beijing.
China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell as much 2.1 per cent on Thursday as traders worried about increased tensions between the world’s two biggest economies. The benchmark was later almost flat.
Hyundai Q2 earnings halve as pandemic batters demand
Edward White and Song Jung-a
Hyundai Motor has reported a slump in second-quarter earnings as the coronavirus pandemic crisis battered global demand.
South Korea’s biggest auto group’s operating profit for the three months to the end of June fell 52 per cent year on year to Won590.3bn ($493m) while revenues sank 19 per cent to Won21.9tn.
“Global auto demand has fallen sharply due to suspended plant operations and lockdowns in major markets amid the spread of Covid-19,” the company said.
“Concerns over the resurgence of Covid-19 and the subsequent economic slump remain despite expectations for a demand recovery in the second half,” it added.
The export-dependent country slipped into recession for the first time in nearly two decades as government stimulus measures and the avoidance of a nationwide lockdown failed to offset the impact of the global economic downturn, figures released on Thursday showed.
Gross domestic product fell by a seasonally adjusted 3.3 per cent in the April-June period, its biggest decline since the first quarter of 1998.
Computer chip manufacturers such as SK Hynix, the world’s second largest maker of memory chips, are bolstering the economy.
Hynix’s operating profits rose threefold as the pandemic drove a surge in demand for the infrastructure that supports online activity such as cloud computing, online meetings, content streaming and gaming.
Insurers reveal scale of Covid-19 claims
A clutch of European insurance companies have revealed the cost of claims relating to coronavirus.
France-based reinsurer Scor said on Thursday that it faced €442m of claims due to the pandemic, mostly from credit risks and property business interruption policies. The company is also facing a €14m loss on its investment portfolio.
UK-based Beazley, meanwhile, said that its Covid-19 claims would reach $170m, with its marine, property and reinsurance business the most affected.
On Wednesday evening, Swiss Re said it faced a total of $2.5bn of Covid-related claims in the first half of the year, mostly for business interruption and event cancellation losses.
Coronavirus is likely to be one of the most expensive events in the history of the industry, with insurers paying out billions of dollars in total on a wide range of policies.
However it could be years before the final cost is known, with litigation already under way across the world to determine which policies should be paying out, and how much they should be paying.
UN, Nobel laureates call for global solidarity as recession fears escalate
Senior UN officials, Nobel laureates and eminent academic experts gathered virtually on Wednesday for the launch of a report recommending “an adjusted approach” to economic development.
With multilateral cooperation under strain, they called for policy dialogue exploring how countries can recover from Covid-19 in ways that lead to structural transformation.
“Parallel threats linked to health, economic and social crises have crippled countries and left us at a standstill,” said Liu Zhenmin, the UN’s under secretary-general for economic and social affairs, as he presented the new report by the High-level Advisory Board on Economic and Social Affairs.
Titled “Recover Better: Economic and Social Challenges and Opportunities”, the report analyses economic trends critical to sustainable development and Covid-19 recovery.
Among its recommendations is a greater focus on the environment, Mr Liu said, as well as promotion of research and development, investment in infrastructure and education, and improvements in economic equality.
Europe’s housing market shows signs of life
Martin Arnold in Frankfurt, Ian Mount in Madrid and Valentina Romei in London
When swaths of Europe were forced into coronavirus lockdowns four months ago, it became almost impossible for aspiring home buyers to do house viewings or arrange a mortgage — freezing most activity in the region’s housing markets.
But there are indications that the sharp downturn may already be coming to an end. Eurozone mortgage lending rebounded in May after sharp falls in March and April.
And although eurozone banks reported a sharp decline in demand for mortgages in the second quarter, according to the latest survey by the European Central Bank, most banks predict mortgage demand will recover in the third quarter.
The consultancy Oxford Economics estimates that house prices fell on a quarterly basis in all major European economies in the three months to June — and countries that report monthly house price data, including Portugal and Germany, have documented rapidly slowing growth.
But estate agents and central bankers say property transaction volumes have begun to bounce back.
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Japan and sustainability: coronavirus prompts corporations to confront workplace inefficiencies
In early July, six months after Japan reported its first case of coronavirus, the technology group Fujitsu made a striking announcement. Under its new plan for life alongside the virus, office space will be halved, smaller hubs set up around the country and telework will become the “new normal” for the company’s 80,000 staff in Japan.
The practical implications were huge, but the symbolism was arguably even greater. Fujitsu has tried many times before to cast itself as a bold innovator on workplace and sustainability issues, but it has been unable to shake the image of being another large, conservative Japanese corporation with the usual range of traditional, labour-intensive working practices and conventions at its core.
Now, under the strange propellant force of Covid-19, Fujitsu appears to be admitting that some of the greatest time and energy drains of Japanese working life — including strict office hours, presenteeism and constant travel for face-to-face meetings — may finally have been exposed as at least partially unnecessary.
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China stocks fall after US orders closure of Houston consulate
Hudson Lockett in Hong Kong
Chinese stocks fell a day after Washington ordered the closure of the country’s consulate in Houston over spying concerns, drawing condemnation from Beijing.
China’s CSI 300 index of Shanghai-and Shenzhen-listed stocks fell 1 per cent on Thursday as traders weighed up the prospect of increased tensions between the world’s two biggest economies.
Hong Kong’s benchmark Hang Seng index gyrated between gains and losses, climbing 0.4 per cent in late morning trade.
Beijing has warned that it will retaliate unless Washington reconsidered the embassy’s closure, which it said “seriously violates” the norms of international relations.
China’s onshore renminbi exchange rate softened 0.1 per cent to Rmb7.006 against the dollar after the country’s central bank on Thursday set the band in which the currency is permitted to trade at a weaker level.
The rate weakened past the key seven-per-dollar threshold on Wednesday after the US ordered the Houston consulate to shut.
Futures markets tipped the S&P 500 to open 0.1 per cent higher when trading begins later on Wall Street while London’s FTSE 100 was expected to drop 0.1 per cent.
India reports record 45,600 new coronavirus cases
Amy Kazmin in New Delhi
India has detected an all-time high of nearly 45,600 new coronavirus infections over the last 24 hours, as the spread of the virus continues to accelerate in the South Asian country of 1.4bn people.
India’s confirmed coronavirus caseload has now risen to 1.2m, of whom a total of 28,890 have died.
The country also reported a record high of 1120 deaths in the same period. However, the tally also included the addition of more than 444 earlier coronavirus deaths in the southern State of Tamil Nadu that were not previously attributed to the virus.
As the virus continues to cast a long shadow over the country’s life and economic prospects, Prime Minister Narendra Modi’s government has sought to focus public attention on India’s relatively low deaths per million count to argue that India is faring far better than many richer, more advanced nations.
Public health experts note that India is notoriously poor in accounting for deaths in the country, and the official death toll is almost certainly a serious undercounting.
In some states, hospitals and officials have been under intense pressure to attribute the deaths of coronavirus patients to other underlying health issues, such as diabetes, raising serious doubts about the reliability and accuracy of the official toll.
Covid crisis softens Germany’s stiff corporate culture
Joe Miller in Frankfurt
After months of being banished from the office because of Covid-19 restrictions, 140,000 Siemens employees in 43 countries learnt last week they had earned the permanent right to work from home for up to three days a week.
“The coronavirus crisis was the decisive moment,” said Jochen Wallisch, head of industrial relations and employment conditions at the Munich-based group. “If there is one positive thing in this crisis, it is that it has shown what is possible with remote working.”
The company, one of Germany’s largest employers — it had 300,000 workers off-site at the height of the pandemic — says the scheme is voluntary and staff who want to work from the office will always be able to do so once restrictions are fully lifted.
It is one of several Dax companies responding to calls from workers, usually tied to their desks in Germany’s stiff corporate culture, for flexible arrangements to continue. According to research by the Ifo economic institute, just over half of all German companies want to follow in their footsteps.
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Australia’s budget deficit biggest since second world war
Jamie Smyth in Sydney
Australia has reported its largest budget deficit since the second world war due to the spiralling cost of emergency measures introduced to keep people in jobs and prevent an economic collapse due to Covid-19.
An A$95bn (US$68bn) fall in tax receipts over the 2019-20 and 2020-21 financial years and A$164bn in additional public spending have turned a forecast budget surplus into ballooning deficits of 4.3 per cent of gross domestic product in the year to end June 2020 and 9.7 per cent this financial year.
However, a government wage subsidy scheme and targeted support for businesses have cushioned the pandemic’s impact on the economy, which is forecast to contract by 0.25 per cent in 2019-2020 and 2.5 per cent in 2020-21.
“Australia is experiencing a health and economic crisis like nothing we have seen in the last 100 years,” said Josh Frydenberg, Australia’s treasurer. “Our economy has taken a big hit and there are many challenges we confront … We must remain strong.”
Mr Frydenberg said Australia’s economy was performing much better than most of developed nations due to its strong handling of the health and economic impacts of Covid-19, noting the US and UK would experience far sharper economic contractions this year.
The spread of Covid-19 to Australia in late February and strict social distancing rules had an immediate impact on the job market with the loss of 870,000 jobs between March and the end of May. Unemployment is forecast to peak at 9.25 per cent in December, up from 7.4 per cent in June.
Mr Frydenberg said government support schemes had saved 700,000 jobs and ensured unemployment did not peak five percentage points higher than that rate.
Richard Yetsenga, chief economist at ANZ bank, said the extraordinary fiscal response from the government has forestalled an even more dramatic economic outcome in Australia.
“The budget’s natural stabilisers, through unemployment support for instance, have played a role. But most important has been the discretionary policy efforts which are the largest in history,” he said.
He said the budget deficit was the largest since the end of the second world war, when it peaked at 27 per cent of GDP.
Republican divisions threaten new stimulus proposal
James Politi and Lauren Fedor in Washington
The White House and Republican congressional leaders have reached a deal on a new package of stimulus measures to aid the US economy, but are facing a backlash from rank-and-file members of their party that could complicate prospects for a final agreement in Congress.
Republican opposition has been building over the course of the week, and intensified as Mitch McConnell, the party’s leader in the Senate, and Trump administration officials finalised terms of a plan to spend $1tn to sustain households and businesses grappling with the pandemic.
Final passage of stimulus legislation on Capitol Hill was already problematic because the Democratic-controlled House of Representatives had passed a $3tn bill, and was unlikely to accept a far smaller package.
Meanwhile, many Republican lawmakers are hardening their stances, arguing their party’s stimulus plan is too expensive and fretting that Americans risk becoming wholly dependent on government aid.
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China reports 18 Covid-19 cases in Xinjiang
Health authorities in China reported 18 new coronavirus cases in Xinjiang as an outbreak in the region continued to grow.
The new cases in the western region that’s home to the Uighur ethnic minority, take the tally since last Wednesday to 82. Lockdowns of residential compounds and travel restrictions were imposed to limit the spread of the virus.
More than 1m people in the region’s capital, Urumqi, have been tested for the virus, local authorities said on Wednesday.
Liaoning, an industrial province in China’s northeast, also reported one local coronavirus case. The 58-year-old man is a resident of the port city of Dalian.
Three imported cases of Covid-19 take China’s total number of cases to 83,729.
US deaths rise by more than 1,000 for second straight day
The US reported more than 70,000 new coronavirus cases on Wednesday and back-to-back days of more than 1,000 deaths for the first time since May.
A further 70,043 people tested positive for the virus over the past 24 hours, according to Covid Tracking Project data, up from almost 63,000 on Tuesday.
That is the third-biggest single-day increase for the US and was spurred along by a record increase of 12,807 in California, which surpassed New York as the state with the highest number of total coronavirus cases since the start of the pandemic.
Texas (9,879) and Florida (9,785) reported the next biggest increases and were among the 17 states that had one-day jumps of more than 1,000 cases, according to Financial Times analysis of Covid Tracking Project data.
Oklahoma (1,868), Missouri and North Dakota (160) were the other three states to report record increases. A further 1,126 people died, up from 1,029 on Tuesday – the first time since May 29 fatalities have risen by more than 1,000 for two days in a row.
Texas (197) reported the biggest jump in deaths, while rates in Florida (140) and California (115) also remained elevated. Alabama (61), Nevada (28) and Oklahoma (22) also reported a record number of fatalities.
World’s second-biggest chipmaker sees sales soar as lockdowns boost demand
Edward White in Wellington
The world’s second-biggest producer of memory chips has reported a sharp increase in second quarter sales and profits as greater online activity during the coronavirus pandemic underpinned solid demand.
SK Hynix, which makes memory chips used by almost all modern electronic devices, says sales in the three months to the end of June rose 33 per cent to Won8.6tn ($7.2bn) year-on-year, while operating profit jumped 205 per cent to Won1.9tn.
The results for the South Korean tech giant, which were ahead of analyst estimates provided by Refinitiv, follows a first quarter net profit decline of more than 40 per cent after China’s nationwide shutdown in January and February.
But the lockdowns of cities and countries around the world during the pandemic has driven a surge in demand for the backend infrastructure — like computer chips and servers — that enable online meetings, conferences and classes, as well as gaming and content streaming. This has helped soften the blow from lower spending on consumer electronics, including smartphones — usually a key revenue source for tech groups.
Prices for DRAM chips, which help devices perform multiple tasks, rose 15 per cent quarter-on-quarter as sales for servers and graphics offset weak mobile demand, SK said. Prices for NAND chips were up 8 per cent amid higher demand for data storage.
The company said that despite continued uncertainties in the second half of the year — related to the virus and the US-China trade dispute — new gaming consoles, 5G roll-outs and the gradual reopening of economies should support further growth.
Analysts have cautioned, however, that the buoyant chip prices — which has in part stemmed from data centres stockpiling chips — might be only short-term given the backdrop of global economic uncertainty.
Still, the results also reflect the resilience of South Korea’s electronics manufacturers during the pandemic, particularly in the companies’ highly-automated chip factories at home and in China, which have seen few disruptions.
This month, SK Hynix’s bigger rival Samsung Electronics forecast a better-than-expected 23 per cent jump in second quarter profits.
SK Hynix’s shares have been trading about 20 per cent below their pre-pandemic peak but have recovered by around 25 per cent since March.
US-China tensions weigh on Asia-Pacific stocks
Stocks in Asia-Pacific fell on Thursday amid rising geopolitical tensions between the US and China.
In Japan, the Topix was down 0.6 per cent, the Kospi in South Korea shed 0.7 per cent and the S&P/ASX 200 dipped 0.2 per cent. Futures tip Hong Kong’s Hang Seng to edge down 0.1 per cent.
Rising US-China tensions weighed on sentiment on Wednesday after Washington ordered China close its consulate in Houston over spying concerns, drawing threats of reprisals from Beijing.
The offshore renminbi, which weakened past 7 to the dollar on Wednesday, was little changed at Rmb7.094.
Overnight on Wall Street, the S&P 500 closed up 0.6 per cent following a late rally that was sparked by better than expected company earnings.
S&P 500 futures were down 0.2 per cent.
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Microsoft turned in another quarter of stronger than expected growth late on Wednesday, as the pandemic brought a jump in activity in its gaming business and solid demand for PCs.
Tesla reported its fourth consecutive net profit on Wednesday, a milestone for the electric car pioneer whose market valuation now far exceeds any other carmaker on the planet. The Fremont-based carmaker led by Elon Musk reported a net profit of $104m in the quarter to June.
Three additional states will require that people wear face coverings, as parts of the US combat a recent uptick in Covid-19 infections. Minnesota governor Tim Walz, a Democrat, announced the mask order on Wednesday, saying it was the “cheapest, most effective way” to reopen businesses and schools.
California reported its biggest one-day jump in coronavirus cases to surpass New York as the US state to have confirmed the most cases of coronavirus during the pandemic. The nation’s most populous state reported a further 12,807 people tested positive for Covid-19 over the past 24 hours.
Arizona reported fewer than 2,000 new coronavirus infections on Wednesday, continuing a recent trend that has seen increases in cases retreat from peak levels. Florida reported its second-biggest increase in deaths on record, but the state also reported fewer than 10,000 coronavirus cases for the second day.
Women leaders have outperformed in the pandemic, European Central Bank president Christine Lagarde said, citing the better communication and decision-making by female heads of state in Germany, Taiwan, Belgium and New Zealand. “Women tend to do a better job,” said Ms Lagarde.
North-eastern Spain’s Catalonia region reported an additional 721 cases of Covid-19 on Wednesday, as it fought to contain the country’s two largest outbreaks. Almost three-quarters of the new cases were in the Barcelona metropolitan area.
US crude stockpiles rose unexpectedly last week and fuel demand dropped sharply, as mounting coronavirus cases and renewed shutdowns in some states stalled a recovery in the country’s oil market. Commercial stocks of crude oil rose to almost 540m barrels, up less than 1 per cent.
Sales of previously owned homes in the US rebounded by the most on record in June after three months of declines. US existing home sales climbed 20.7 per cent to an annualised pace of 4.72m last month, the National Association of Realtors said.
South Korea falls into recession despite avoiding lockdowns
Song Jung-a in Seoul
South Korea has fallen into recession for the first time in nearly two decades as the avoidance of a nationwide lockdown and unprecedented government stimulus failed to shield the export-dependent economy from the global coronavirus pandemic.
Gross domestic product fell by a seasonally-adjusted 3.3 per cent in the April-June period, its biggest decline since the first quarter of 1998, slipping into a technical recession. It follows a 1.3 per cent contraction in the first quarter and was worse than a 2.3 per cent decline forecast by a Reuters poll.
The country did not impose a lockdown during the pandemic unlike many other advanced economies, instead relying on aggressive testing and contact tracing. The no-lockdown policy, together with various stimulus measures, helped boost domestic consumption but failed to offset slumping exports amid cooling global demand for its exports.
Exports, which accounted for 40 per cent of the country’s GDP, dropped 16.6 per cent in the second quarter, the sharpest fall since the fourth quarter of 1963. Private consumption increased 1.4 per cent quarter on quarter, helped by government cash handouts to all households, following a 6.5 per cent fall in the first three months of the year.
The country’s overseas shipments were hit hard by lockdowns in its major trading partners including the US.
The Bank of Korea expects the economy to shrink by more than 0.2 per cent this year while the International Monetary Fund forecast a 2.1 per cent contraction.
However, economists expect a faster recovery of the South Korean economy in the second half, helped by relatively solid demand for semiconductors and exports to China, the only major economy forecast to grow this year.
“Higher frequency economic indicators suggest a modest recovery is in motion, and we expect growth to return to positive territory in Q3 on a sequential quarter-on-quarter basis. Fiscal stimulus will continue to shore up domestic demand, but until uncertainties surrounding the global economy materially fade, the recovery will be gradual,” ANZ analysts said in a note.
The South Korean government has rolled out a record Won277tn ($231bn) worth of stimulus measures so far this year to shore up the virus-hit economy. Separately, it announced a Won160tn spending plan last week to create 1.9m jobs by 2025, mainly in the digital technology and green energy sectors.