Trump hits back at Bright’s accusations over Covid-19 threat
Kiran Stacey in Washington
The Trump administration has hit back at accusations from the former director of the body charged with funding potential drugs and vaccines to tackle coronavirus who this month filed a whistleblower complaint.
Rick Bright, who until recently headed up the Biomedical Advanced Research and Development Authority, has accused senior officials of ignoring the threat of coronavirus in the early days of the US outbreak and of pushing hydroxychloroquine as a potential treatment despite a lack of evidence that it works.
The health department, in a lengthy statement released on Thursday, rebutted several points made by Dr Bright in a whistleblower complaint he filed after being ousted from his job. The statement was released as Dr Bright began testifying to Congress for the first time since filing the complaint.
Dr Bright said he was demoted after resisting attempts to make hydroxychloroquine available for use outside hospitals. The health department did not refute that point, but said he had been among those looking to secure supplies of the drug for use in the US.
The health department denied that others in the administration did not take the virus seriously in its early days, calling that claim “bizarre and false”.
‘Second or third wave’ threatens world’s poorest, warns former PM
Gordon Brown, former UK prime minister, has urged countries to act in unity, as future outbreaks of coronavirus threaten to devastate the world’s poorest populations.
Mr Brown warned of a stark need to find “cross border solutions” to prevent the health crisis from reaching a tipping point in societies that are least equipped to cope.
The “global emergency” cannot truly be ended “unless it is eradicated in every continent”, he wrote in the foreword of a report by charity Chrisitan Aid released on Thursday. “It is in all our interests to prevent a second or third wave starting in the poorest, least protected countries with the most underdeveloped health systems,” he added.
The Tipping Point report highlights the health, economic and humanitarian thresholds in four vulnerable populations in Sierra Leone, South Sudan, Gaza, and the Rohingya refugees in Bangladesh.
Reaching these limits, “could see millions of women, children and men plunged from crisis into catastrophe,” wrote the report’s authors.
In case you missed it: Inside Trump’s Coronavirus Meltdown
The FT’s Ed Luce has written a searing analysis that peers inside the US president’s handling of the Covid-19 crisis and finds:
In hindsight, Trump’s claim to global leadership leaps out. History will mark Covid-19 as the first time that ceased to be true. US airlifts have been missing in action. America cannot even supply itself.
Read more here.
Search for Covid-19 vaccine likely to take longer than 18 months – Bright
Kiran Stacey in Washington
Finding a coronavirus vaccine is likely to take longer than the 18 months frequently mentioned by US government scientists, Rick Bright has warned.
Dr Bright was until recently the head of the Biomedical Advanced Research and Development Authority, one of the US government agencies in charge of finding a vaccine. But he was ousted from that position last month, a decision that prompted him to file a whistleblower complaint against the government.
He warned on Thursday that the hunt for a vaccine was unlikely to come to fruition in the timescale many have forecast. “A lot of optimism is swirling around a 12 to 18 month timeframe,” he told the House health subcommittee.
If everything goes perfectly. We’ve never seen everything go perfectly. My concern is if we rush too quickly, and consider cutting out critical steps, we may not have a full assessment of the safety of that vaccine. So, it’s still going to take some time. I still think 12 to 18 months is an aggressive schedule. And I think it’s going to take longer than that to do so.
Americas: What you might have missed…
To readers just tuning in, here is a summary of the latest news on coronavirus from our global network of FT correspondents.
Global stocks slid as hopes for a quick economic recovery from the crisis faded after news that almost 3m Americans filed for unemployment benefits for the first time last week. London’s FTSE 100 fell nearly 4 per cent while the S&P 500 on Wall Street was down 1.5 per cent.
Delta Air Lines retired its entire fleet of Boeing 777 jets, taking up to a $1.7bn charge, and projected sluggish prospects for the revival of international travel in the months ahead.
France put €18bn on the table to rescue its faltering tourist industry, which has been hit especially hard by the pandemic. Prime Minister Edouard Philippe described the sector as “one of the crown jewels of the French economy”.
The pandemic slowed in New York as the US state registered 115 deaths yesterday, its lowest number since the end of March. Meanwhile, the global daily death toll held steady.
Andrew Bailey, governor of the Bank of England, said that a scenario for a relatively rapid recovery from the current deep recession, set out last week, could prove too optimistic, with “no question” that the risks were to the downside. Mr Bailey spoke at the FT Global Boardroom digital conference.
Shares in Norway’s answer to videoconferencing company Zoom rose more than 41 per cent in its debut session trading on the Oslo stock exchange. Pexip shares rose to Nkr97 in early morning trading, before settling at Nkr89, valuing the company at Nkr8.8bn ($860m).
Financial Times announces second round of cost cuts
Alex Barker in London
The Financial Times is cutting the salaries of many staff outside the newsroom in a second round of cost-saving measures to cope with the fallout from the pandemic.
With advertising revenue dropping 50 per cent in April and hopes of a rapid rebound receding, John Ridding, chief executive, said further actions were needed to steady the group finances for 2020.
From July, the FT plans a 10 per cent reduction in pay and working hours for those earning more than £50,000, or equivalent savings in some departments. The measures follow reductions in pension contributions and the pay of senior management announced last month.
Given the crisis-related demands on the newsroom and reporting network, Roula Khalaf, the editor of the FT, will have flexibility in deciding how the savings are found.
“Rather than across the board reductions in salaries and time, we are aiming to generate the balance of our editorial savings mainly through reduced spending on outside contributors, careful management of staff numbers and some voluntary measures,” Ms Khalaf said in a note to editorial staff. “I am optimistic that this is achievable.”
Dozens of media groups in Europe and the US have been hit hard by the coronavirus crisis, forcing significant cost-cutting at digital media groups such as Buzzfeed and Vice, magazine publishers such as Condé Nast, and newspapers such as the LA Times and Guardian.
While the FT has added 50,000 subscribers since the start of the pandemic, Mr Ridding told staff “the impact on the FT continues to be significant”. “We expect these savings to be sufficient for us to navigate through this storm, and don’t expect to take further steps in relation to pay,” he added.
Germany forecasts €100bn drop in tax income
Guy Chazan in Berlin
Germany has radically revised its forecast for tax revenue this year, saying it now expects roughly €100bn less than it previously expected, as the coronavirus pandemic causes a massive slump in economic activity.
The forecast highlights just how badly Covid-19 and the resulting economic turmoil have disrupted Germany’s public finances. Ministers this year expect Germany to experience the worst recession in its postwar history, with gross domestic product set to shrink 6.3 per cent.
All levels of government will have to make do with €98.6bn less in tax income than had been foreseen in November when the budget for 2020 was drafted.
The forecasts include estimated tax shortfalls of between €50bn and €60bn each year through to 2024, compared with the previous estimates.
Germany has abandoned years of fiscal restraint as it tries to soften the economic impact of the pandemic.
An emergency budget unveiled in March envisaged €150bn in new borrowing — a radical departure from the previous policy of balanced budgets and no new debt.
Olaf Scholz, finance minister, confirmed on Thursday that the government would launch major fiscal stimulus in June, which is expected to put even more pressure on public finances.
Production on popular BBC shows to start in June
Sarah Provan in London
Award-winning BBC shows EastEnders and Top Gear will return to production by the end of next month, the public broadcaster has said, after nearly all filming stopped when the government imposed a lockdown in March.
Actors will adhere to coronavirus guidelines, ensuring they are socially distanced from each other, and will apply their own hair and make-up.
The public broadcaster wants to “help fire up the engines of British television production — safely and sensibly” and will use “strictly limited” crews, its director of content said.
“We’re also exploring ways to re-start filming on more dramas and other major BBC shows as soon as possible,” Charlotte Moore wrote in a BBC blog that first appeared in the Daily Telegraph.
EastEnders, a half-hour twice-weekly show that delves into the ordinary lives of Albert Square residents in the East End of London, has kept its fans watching during the lockdown. BBC One has rationed completed episodes to avoid it going off air.
Car series Top Gear gained popularity with presenters Jeremy Clarkson, James May and Richard Hammond and more recently starred US actor Matt Le Blanc.
US equities slide on painful jobless claims data
Wall Street followed European and Asian bourses lower as hopes for a quick economic recovery from the coronavirus crisis faded and figures showed that almost 3m more Americans filed for unemployment benefits last week.
The S&P 500 dropped more than 1 per cent when Wall Street opened, a day after Jay Powell, chair of the US Federal Reserve, warned that a US “recovery may take some time to gather momentum”. The tech-heavy Nasdaq Composite slipped 0.9 per cent.
New figures released by the US labour department on Thursday showed 2.98m Americans filed for unemployment benefits last week, taking the total to 36m in eight weeks.
“Hard on the heels of . . . Powell’s downbeat comments on the US economy come initial jobless claims that are worse than expectations,” said Neil Birrell, chief investment officer at Premier Miton. “Equities have been struggling since Powell spoke and there is nothing in these numbers to provide respite.”
European stock exchanges suffered heavy losses. London’s FTSE 100 tumbled 3.5 per cent, while Frankfurt’s Xetra Dax fell 2.8 per cent and the region-wide Stoxx Europe 600 dropped 2.8 per cent.
Trump says work to find a vaccine ‘very promising’
Donald Trump has said work to find a Covid-19 vaccine is “looking very promising”.
“Vaccine work is looking VERY promising, before end of year,” the US president posted in a message on Twitter, without giving any details.
There is a global push to develop, produce and distribute a vaccine, although experts have warned it will take a significant amount of time to distribute successful doses, if one is ever found.
Fears are intensifying over the spectre of countries competing for first access. France on Thursday warned Sanofi it would be “unacceptable” for any country to gain priority access, after the Paris-based drugmaker said the US was likely to receive the first doses.
Delta to retire 777 fleet as it projects sluggish international travel revival
Delta Air Lines is retiring all the Boeing 777 jets in its fleet, taking up to a $1.7bn charge, because it expects demand for international air travel to recover more slowly than for domestic flights.
The Atlanta company operates 18 of the double-aisle aircraft among its 874-strong main fleet and 442 regional jets. The airline already has parked 650 jets temporarily and accelerated a plan to retire its MD-88s and MD-90s within six months. The 777s will go out of service by the end of the year.
“Retiring a fleet as iconic as the 777 is not an easy decision,” chief executive Ed Bastian said in a memo to employees. “The 777 played an important role with Delta since 1999, allowing us to open new long-haul markets and grow our international network as we transformed into a global airline. … However, parking this fleet will provide significant cost savings over the next several years.”
Delta wants to reduce its cash burn from $50m a day to zero by the end of the year, Mr Bastian said.
The 777 flew routes like Minnesota to Tokyo and Los Angeles to Sydney, and Mr Bastian noted that demand for domestic travel is forecast to rebound before international.
“Our A330s and A350-900s, which are more fuel-efficient and cost-effective, will perform long-haul flying as international demand returns,” he said.
Delta said in a regulatory filing it will take a charge to its earnings in the second quarter as “the carrying value of these aircraft was no longer recoverable when compared to their estimated remaining future cash flows”.
France pledges €18bn to support ailing tourism sector
David Keohane in Paris
France is putting €18bn on the table to support its faltering tourist industry, which has been hit hard by Covid-19 as travel has come to a standstill and hotels and restaurants have been closed.
The country’s prime minister, Edouard Philippe, said on Thursday that since tourism “is one of the crown jewels of the French economy, its rescue is a national priority”.
The industry is worth 8 per cent of France’s gross domestic product and employs 2 million people indirectly and directly. Last year it provided transport for some 90m tourists who visited the country.
The aid package, which the prime minister called “unprecedented” is made up of social security tax breaks worth an estimated €2.2bn and direct investments of up to €1.3bn by state banks.
It also includes sector-specific state-backed loans, the extended use of a solidarity fund until the end of the year, and the extension of a partial unemployment scheme for the sector through to at least September.
Currently 95 per cent of the country’s hotels are closed, said Mr Phillipe, adding that he hoped that restaurants and cafes would be able to reopen from June 2 in those areas of the country — known as green zones — where the coronavirus was less present.
The prime minister held out hope that French people would be able to holiday within the country soon — currently trips of more than 100km are not allowed without an urgent reason.
“The French will be able to holiday in France in July and August,” he said.
US equities to fall after 3m more Americans file for jobless benefits
US stock markets are set to slide on Thursday, following their European and Asian counterparts, as hopes for a quick economic recovery from the pandemic crisis faded after figures showed that almost 3m Americans filed for unemployment benefits for the first time last week.
Futures for the S&P 500 point to losses of more than 1 per cent when Wall Street opens, a day after US equities fell 1.7 per cent. Jay Powell, chair of the US Federal Reserve, warned on Wednesday that a US “recovery may take some time to gather momentum”.
The country risked an “extended period of low productivity growth and stagnant incomes”, he added, as new figures released on Thursday showed that almost 3m American filed for unemployment benefits last week, taking the total to 36m in eight weeks.
In Europe, London’s FTSE 100 tumbled 3.2 per cent, while Frankfurt’s Xetra Dax fell 2.7 per cent and the region-wide Stoxx Europe 600 dipped 2.5 per cent.
Pandemic slows in New York as global daily death toll holds steady
Steve Bernard in London
A further 4,984 people died of Covid-19 yesterday. This figure is in line with the average of the past 7 days, bringing the death toll to 290,702.
New York registered 115 deaths yesterday, its lowest number since the end of March. Once the centre of the Covid-19 virus in the US, it now has the fifth-highest rate of daily deaths. The state has lost a total of 22,013 people to the virus since the pandemic began.
Globally, the number of newly confirmed Covid-19 cases rose by 85,108 yesterday, closely matching the previous day’s rise, according to data from the European Centre for Disease Prevention and Control.
Brazil remains the worst affected country outside of the US by deaths and cases. It registered a record 11,385 infections yesterday, bringing the total to 188,974. The death toll has remained consistently high — averaging more than 600 deaths for the past 10 days — as a further 749 were recorded yesterday. The pandemic is also accelerating in Peru, Chile and Mexico, which are adding thousands of new cases every day.
Russia reported fewer than 10,000 new cases for the first time in 12 days — 9,974 infections were registered bringing the total to 252,245. The country’s death toll remains low relative to the number of infections as 93 people lost their lives yesterday, increasing the total since the pandemic began to 2,305.
Explore data about the pandemic to better understand the disease’s spread and trajectory in the live-updating and customisable version of the FT’s Covid-19 trajectory charts.
Almost 3m Americans filed for first-time jobless benefits last week
Peter Wells in New York
Almost 3m Americans filed for unemployment benefits for the first time last week, taking the number of applications to more than 36m in the eight weeks since the widespread lockdowns due to the Covid-19 pandemic.
Although it was the lowest increase since mid-March, the number of initial jobless claims was 2.98m in the week ended May 9, the US labour department said on Thursday, from 3.2m a week earlier. This compared with expectations of 2.5m applications, according to a survey of economists by Refinitiv.
While jobless claims have retreated for six consecutive weeks from a record 6.69m in late March, the rates of decline depend heavily on how successfully states can reopen their economies, a nascent process that is far from uniform across the country.
BoE governor warns of ‘scarring’ for UK economy
Delphine Strauss in London
Andrew Bailey has said that the Bank of England’s scenario for a relatively rapid recovery from the current deep recession, set out in last week’s monetary policy report, could prove too optimistic, with “no question” that the risks were to the downside.
“There will, I am sure, be some scarring. There is a huge amount of uncertainty over what it will be,” the BoE governor said, while arguing that policies such as the job retention scheme could help employment rise more rapidly than after a “normal” recession once the economy began to reopen and confidence that the country could avoid a second wave of infection returned.
The BoE believes the UK banking system still has plenty of headroom to weather the current downturn, Mr Bailey said – not least because the government is absorbing some of the losses, and interest rates are likely to remain low. However, he acknowledged that if it proved necessary to keep lockdown measures in place, “there does come a point where if this goes on long enough, [financial sector stability] does come into question.”
Asked whether he would consider cutting interest rates below zero, Mr Bailey said it was not something the BoE was currently contemplating, since it would raise big issues for the banking sector and in terms of communication and managing market reactions.
BoE is in effect financing UK Covid-19 response, governor says
Delphine Strauss in London
Andrew Bailey has accepted that the Bank of England is in effect financing the government’s response to the coronavirus crisis, while defending its stimulus policies as essential to cushion the blow to the economy.
The BoE governor, speaking at the FT Global Boardroom digital conference, said that the central bank’s rapid expansion of quantitative easing made sense both to calm financial markets and keep inflation on track, and also “in terms of smoothing the profile of government borrowing and the impact that might have on financial markets”.
Central banks would have to think hard about how to manage their much bigger balance sheets once the crisis was over, he said, but added: “I’ve no doubt that what we are doing is the right thing to do… smoothing a huge shock for which it is essential that government should step in.”
Mr Bailey said there was no single definition of monetary finance, and made it clear that the BoE’s current policies did not match the more extreme versions of the term. There was no question of “fiscal dominance”, in which a government’s fiscal objectives override the central bank’s task of keeping inflation on target, he said; and government borrowing could not be cost-free, given that the BoE was still paying interest on reserves.
US equities set to drop as hopes for quick recovery ebb
US stock markets are set to fall on Thursday, following European and Asian counterparts, as hopes for a quick economic recovery from the pandemic have faded.
Futures for the S&P 500 suggest losses of 0.5 per cent when Wall Street opens, a day after US equities moved 1.7 per cent lower in response to Jay Powell, chair of the US Federal Reserve, warning on Wednesday that a US “recovery may take some time to gather momentum”.
The bleak outlook was echoed by Bank of England governor Andrew Bailey who said that there will be “some scarring” in the economy from the crisis, although it is uncertain how much, in the Global Boardroom online conference hosted by the Financial Times.
In Europe, London’s FTSE 100 tumbled 2.7 per cent, while Frankfurt’s Xetra Dax fell 2.2 per cent and the region-wide Stoxx Europe 600 dipped 2.1 per cent.
Hong Kong’s benchmark Hang Seng fell 1.5 per cent, while Japan’s Topix index closed down 1.9 per cent, where the state of emergency was lifted in 39 prefectures after market close.
India to provide food aid to tens of millions of migrant workers
Amy Kazmin in New Delhi
India will spend $466m to provide 5 kilogrammes of free wheat and rice to every person, and 1kg of lentils per household, to an estimated 80m migrant workers who are stranded in cities and industrial areas, many without work or wages.
The food aid, which will be handed out over the next two months, is part of a relief package intended to help India’s economy recover from the blow of a protracted lockdown.
Finance minister Nirmala Sitharaman said New Delhi will overhaul its food support system to ensure that holders of ration cards, which entitles them to access subsidised food, can use the cards to access cheap food grains wherever they live in the future.
Much of the Indian population is entitled to subsidised food grains each month, but typically these rations are distributed to individuals only at their permanent address – usually their native villages.
Social activists have called for the cards to be made “portable” so migrant workers can access their benefits wherever they reside.
After India’s lockdown began, many desperate migrants – without work or wages – undertook arduous treks on foot back to their villages, where they could receive the ration entitlement. Most of those left behind spent much of the lockdown dependent on daily handouts from temporary feeding centres and charities.
Mayor warns Transport for London’s rescue deadline is hours away
Jim Pickard and Bethan Staton in London
Transport for London will have to axe services if the government does not agree to a financial rescue package by the end of the day, the capital’s mayor said on Thursday.
The transport authority is “running out” of money, Sadiq Khan said, adding that he is concerned about the consequences if the government fails to step in to plug an anticipated £4bn black hole in TfL’s finances this year.
“Unless the government today gives us confirmation of the grant that we need, the consequences could be quite severe and the implications for all of us will be huge,” the London mayor told LBC radio.
“We’ll have to start reducing services,” Mr Khan said in an interview with the London-based national phone-in and talk radio station. “The only way to balance the books is to cut services.”
TfL, which has had its government grant gradually withdrawn in recent years, relies almost entirely on fare income — but passenger numbers have plunged to a trickle during the coronavirus pandemic.
The agenda for TfL’s finance committee meeting this week said there was still a gap of £3.2bn in the authority’s emergency budget for this financial year to the end of March 2021.
The authority is in talks with DfT and the Treasury about a rescue package that is expected to include conditions, including the postponement of several projects such as a proposed Bakerloo Line extension.
3M continues to see sales boost from healthcare in April
3M said it continued to experience a revenue boost in its healthcare division during April in its first sales update since deciding to inform investors on a monthly basis.
The conglomerate, whose products range from Post It notes to the more recently coveted N95 face mask, said that broadly, trends for April “were largely in line” with the month-to-date trends 3M discussed during its first-quarter earnings call held late last month.
Total sales for April of $2.3bn were down 11 per cent from a year earlier. A 5 per cent increase in total sales in its healthcare division was offset by an 11 per cent decline in the consumer segment, an 11 per cent drop for safety and industrial, and a 20 per cent tumble in transportation and electronics.
Minnesota-based 3M reiterated that while the coronavirus pandemic has resulted in “strong end-market” demand for its personal safety, semiconductor and data centre, general cleaning and food safety products, physical distancing and national lockdowns have hobbled the likes of its oral care, automotive and office stationery items.
By region, total sales in Asia Pacific, Americas and Europe, Middle East and Africa were down 5 per cent, 13 per cent and 12 per cent, respectively. Still, the company said it saw sales growth in China, where Covid-19 originated, as the economy tries to get back on track quickly.
3M said at its first-quarter results that it would provide monthly sales figures in lieu of its 2020 earnings forecast.
Free to read
Opinion: Covid-19 looks like a hinge in history
Lawrence Summers is a former US Treasury secretary and a Harvard professor
The Covid-19 crisis is the third major shock to the global system in the 21st century, following the 2001 terror attacks and the 2008 financial crisis. I suspect it is by far the most significant.
Although the earlier events will figure in history textbooks, both 9/11 and the Lehman Brothers bankruptcy will fade over time from popular memory.
By contrast, I believe, the coronavirus crisis will still be considered a seminal event generations from now. Students of the future will learn of its direct effects and of the questions it brings into sharp relief much as those of today learn about the 1914 assassination of the Archduke, the 1929 stock market crash, or the 1938 Munich Conference.
These events were significant but their ultimate historical importance lies in what followed.
Read the op-ed in full here.
Emirates airline tells ground staff to brace themselves for job cuts
Simeon Kerr in Dubai
Dubai’s Emirates has told staff to prepare for layoffs at its ground handling unit, according to an internal memo seen by the Financial Times, as the airline cuts costs to deal with the disruption caused by coronavirus.
The redundancies at Emirates Group, one of the largest airlines in the world, come as the industry worldwide reduces staffing levels as demand collapses because of global travel restrictions.
Emirates’ regional rival Qatar Airways plans to make 20 per cent of its staff redundant, its chief executive said in an interview with the BBC posted on Twitter late on Tuesday. The airline had earlier this month warned staff that it would need to make redundancies.
The Dubai government-owned airline said the hibernation of the passenger terminal at the Dubai World Central facility and the relocation of freighter services to the city’s main airport had caused an “excess of roles at DWC and a lack of redeployment opportunities elsewhere around the group”.
The layoffs include airside operations, passenger and baggage services, welcome staff and technical services. The memo, confirmed by the airline, did not identify the number of redundancies.
“We do not view this lightly, and we will continue to take all steps possible to protect jobs wherever we can,” it said.
Emirates said it would cover essential allowances until affected staff can be repatriated to their home countries.
Free to read
The Big Read: Why vaccine ‘nationalism’ could slow coronavirus fight
Richard Milne in Oslo and David Crow in New York
The hunt for a coronavirus vaccine is central to global efforts to restart economies. But, like swine flu, it raises big questions about whether countries will act in their narrow self-interest or embrace a more collaborative, global approach.
More than 100 potential vaccines are in the testing phase and an enormous effort costing tens of billions of dollars and using complex logistics will be needed to manufacture and distribute the successful drugs worldwide.
A mixture of the intense and growing rivalry between the US and China, and the related rise of nationalism and decline in multilateralism is making health experts anxious.
Read the article here.
Shares in Norway’s rival to Zoom soar on stock market debut
Anna Gross in London
Shares in Norway’s answer to videoconferencing company Zoom rose by more than 41 per cent in its debut session trading on the Oslo stock exchange.
Pexip shares rose to Nkr97 in early morning trading, before settling at Nkr89, valuing the company at Nkr8.8bn ($860m).
The Norwegian company, whose technology is used by Vodafone, Amnesty International and Spotify, raised Nkr2.4bn in its initial public offering last week, in the largest Scandinavian software listing on record and in the midst of a lacklustre backdrop for listings in Europe. Shares were sold at Nkr63 each.
The virtual nature of the roadshow — conducted using Pexip software — allowed the company to woo investors across 15 cities rather than the normal one or two.
Pexip has reported a large increase in customer numbers during the coronavirus lockdown as millions of people across the globe turn to videoconferencing platforms to connect with clients, colleagues and friends.
Nearly half of UK businesses expect cash flow to run out by autumn
Valentina Romei in London
Almost half of active UK businesses expect their cash flow to dry up within the next six months, according to a survey by the Office for National Statistics.
Two in five of businesses still operating reported concern that their reserves would run out by autumn, while the vast majority registered a decrease in turnover as a result of the economic shocks caused by the coronavirus pandemic. Around 4 per cent said they had no reserves left.
The results lay bare the hit of coronavirus to businesses and their vulnerability as the crisis continues. Although the government and the Bank of England have introduced measures to support lending to companies, cash-flow problems and job risks persist.
About 72 per cent of active businesses have applied for the government job retention scheme that subsidises wages, while 56 per cent deferred their VAT payments and 20 per cent applied for a business rates holiday.
The survey revealed that 77 per cent of companies had continued to operate in some capacity during the national lockdown.
Over 18,500 UK businesses responded to the survey which ran from April 20 to May 3.
Honda to join other British auto makers about to reopen plants
Peter Campbell in London
Honda will restart production at its Swindon plant from the first week of June, as the trickle continues of British auto facilities preparing to open up after a coronavirus-enforced lockdown.
The Japanese carmaker, which closed its site in March due to the spread of the coronavirus outbreak, had planned to reopen this month but twice pushed back its planned restart date.
The group told staff and suppliers on Thursday that it intends to commence production operations during the week commencing June 1.
It comes the day after Vauxhall owner PSA said its van facility at Luton will reopen on a single shift from Monday, though the company has not set a date for the Ellesmere Port car plant to begin working again.
While some of Britain’s plants are firing up again, most remain closed, with manufacturers reluctant to resume operations while dealerships are shut and demand for cars low.
Here’s a line-up:
• Jaguar Land Rover will reopen its Solihull site on Monday to make vehicles for Chinese export, but has not set a date to restart its other plants at Halewood or Castle Bromwich, or when it will increase production at Solihull for the UK, European or American markets.
• Ford will open from Monday its UK engine plants at Bridgend and Dagenham, which both supply engines to JLR.
• Toyota, which has opened its Deeside engine site, has kept its car plant at Burnaston shut for the time being, while Nissan has warned it does not expect to reopen its Sunderland facility until at least June.
• BMW from Monday will reopen its Mini plant at Oxford, which exports globally.
Japan lifts state of emergency in 39 prefectures
Robin Harding in Tokyo
Japan has lifted its state of emergency in 39 prefectures as coronavirus infections subside but restrictions will continue in Tokyo and other big cities for now.
The prime minister, announcing the decision on Thursday evening in Tokyo, said: “In all of these prefectures, we judge the level of disease is low enough that we can prevent its growth with a thorough strategy to control infection clusters.”
Shinzo Abe’s move marks a big step towards reopening the world’s fourth-largest economy as countries start to lift their emergency measures put in place to control the spread of Covid-19.
It provides some vindication for Japan’s strategy of partial and voluntary social distancing, which has brought about a reduction in infections without a compulsory lockdown.
French unemployment drops as people give up on job hunting
Martin Arnold in Frankfurt
French unemployment did something unusual in the first quarter, falling to an 11-year low despite the record drop in economic activity because of the lockdown imposed on businesses and consumers to slow the spread of coronavirus.
The reason given by the French statistics agency for the drop in unemployment rate from 8.1 per cent to 7.8 per cent in the first three months of the year was that many jobless people had stopped looking for work due to the pandemic.
The fact that many French people were mostly confined to their homes from mid-March had “strongly affected the active job search behaviors” either because certain sectors had ceased to operate, such as restaurants and shops, or because people were no longer available for work due to childcare constraints while schools were closed.
Despite a record 5.8 per cent contraction in the French economy in the first quarter, its labour market was shielded from the full force of the pandemic by the country’s short-term leave scheme, under which 12.4 people are having most of their wages paid by the government while they stay at home.
The statistics agency found that in the final week of March, 27 per cent of jobless people aged 15 to 64 said they would not have been available to work even if they had been offered a job because of the pandemic. This was probably an underestimate because of how the data was collected, it added.
A similarly unexpected drop in unemployment happened in Italy, where the jobless rate fell to 8.4 per cent in March, reflecting the large number of people covered by the government’s furlough schemes or who had given up looking for a job because of the pandemic.
BMW shows strong recovery in China’s auto market
Joe Miller in Frankfurt
BMW says sales in China increased almost 14 per cent in April, underlining the strength of the recovery in the auto industry’s biggest market.
The German group’s figures come after Volkswagen, the world’s largest carmaker, said its business in China had recovered to 2019 levels, due in part to increased interest in its budget Jetta brand.
Premium manufacturer BMW, which had seen a 88 per cent drop in China sales in February, said it was confident that pent-up demand in the country would continue to boost demand.
However, chief executive Oliver Zipse warned that China was “only of limited use as a blueprint for development in other markets”.
Demand for cars in countries including Spain, Italy, the UK and US would “probably be very slow to recover”, he added.
Centre of Covid-19 epidemic in Spain shifts towards Catalonia
Ian Mount in Madrid
Spain’s number of coronavirus-related deaths rose on Thursday, even as the overall trend pointed to a slide, as the centre of the outbreak moved to the northeastern region of Catalonia.
The health ministry reported 217 coronavirus deaths over the past 24-hour period, up from 184 the day before and the highest toll in six days. The official death toll to date is 27,321, although this excludes cases where people were not tested for coronavirus, and so omits many fatalities in care homes.
Spain has reported 1,251 coronavirus-related deaths over the past week, down 18 per cent from the previous week. New cases fell 30 per cent to tally 4,064.
The centre of the epidemic has moved from Madrid to Barcelona in recent days. More than half of Thursday’s death toll — 131 — were in Catalonia. Weekly deaths in Catalonia, Barcelona’s region, rose from 419 to 429, while admissions to intensive care units have risen by almost 50 per cent.
More than half of Thursday’s death toll — 131 — were in Catalonia.
Debt relief framework needed, says Lord O’Neill
The economist Jim O’Neill has said the UK government must focus on creating a plan to alleviate the emerging debt crisis caused by borrowing to tackle the coronavirus pandemic.
“As we try to come out of it [the debt crisis] – and try to ensure the V shape recovery has a chance of working – creating some framework to relieve debt in the future does make sense,” Lord O’Neill, former UK chief Treasury minister, said on the BBC Today programme this morning.
A debate about how to eventually repay the spiralling national debt has heated up as a leaked Treasury document yesterday set out stark options to cut the estimated £337bn deficit.
Jonathan Portes, professor of economics and public policy at King’s College London, said the country would be able to withstand the debt burden as it did following the second world war.
“Government lives forever, countries live forever, hopefully…. And at the moment we can borrow at incredibly low interest rates,” Prof Portes told the programme.
Lord O’Neill, a former chief economist at Goldman Sachs, suggested policymakers should be focusing on making policy tools to stimulate growth in the economy.
“The government should consider asking the Bank of England to pursue nominal GDP targeting rather than nominal inflation targeting, he said: “[Which] means trying to target faster, greater nominal activity in the economy, which would reduce the amount of debt.”
“[This means] taking the risk of having high inflation,” he added.
France warns Sanofi against giving US priority access to any vaccine
Leila Abboud in Paris
France warned Sanofi that it would be “unacceptable” for any country to get priority access to its coronavirus vaccine now in development, slapping down its CEO’s observation that the US would likely get doses first since they were bankrolling the development.
“For us, it would be unacceptable for there to be privileged access to this or that country for financial reasons,” deputy finance minister Agnès Pannier-Runacher told Sud Radio.
Ms Pannier-Runacher added that she had received reassurances from Sanofi that the vaccine would be available to all countries, including France, especially because the company has production capacity there.
Sanofi, which is seen in France as a national champion, said it remained “committed in these unprecedented circumstances to make our vaccine accessible to everyone.”
The political storm began when Mr Hudson told Bloomberg on Wednesday that the US government “has the right to the largest pre-order because it’s invested in taking the risk.” He was referring to funding doled out by the BARDA agency to vaccine makers including Sanofi to help them build production even before efficacy was proven.
Mr Hudson has been lobbying for months for the European Union to adopt a US-like approach to financing vaccine development, but to date has not found a receptive audience.
BA to press on with cuts despite extension to UK furlough scheme
Tanya Powley in London
Willie Walsh, chief executive of British Airways’ parent company IAG, has warned it will not pause its plans to cut up to 30 per cent of its 42,000 workforce in spite of the decision by the chancellor to extend the government’s employee furlough scheme until October.
In a letter to the Transport Select Committee, following his grilling by MPs on Monday, Mr Walsh wrote that he was pleased to see the scheme extended and said the move will provide some “additional relief to our people and our business”.
However, he added:
We must act now to secure the maximum number of jobs possible, consistent with the reality of a structurally changed airline industry in a severely weakened global economy. I want to confirm therefore that we will not pause our consultations or put our plans on hold.
In the letter, sent on Wednesday, Mr Walsh hit out again at the decision by the UK government to quarantine people arriving in the UK by air. He said that, and the recent comments by Matt Hancock, the health secretary, who said it was unlikely that ‘big, lavish international holidays’ were going to be possible this summer, have “seriously set back recovery plans for our industry”.
Slow recovery ahead for UK property market, surveyors say
Valentina Romei in London
Surveyors expect a slow recovery after the property market fell into “hibernation” in April as house viewings were banned and estate agents closed as part of the efforts to limit the spread of coronavirus.
New sellers asking for their property to be marketed fell to minus 96 per cent in April, the lowest reading since records began in 1999, according to the latest monthly survey by the Royal Institution of Chartered Surveyors.
The index for new buyer inquiries fell to minus 93 per cent, and the index for newly agreed sales fell to minus 92 per cent. About 80 per cent of the survey’s contributors said that they have seen buyer or sellers pulling out of transactions as a result of the pandemic.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that:
The housing market remained in hibernation in April as restrictions on property viewings, problems obtaining new mortgages from staff-depleted lenders and huge uncertainty about the economic outlook all impeded activity.
The release of restrictions on property viewing on Wednesday has prompted new interest, according to the housing website Zoopla, which reported property browsing up 139 per cent compared with the average of the previous month.
Yet surveyors think the recovery will be slow. Real estate surveyors participating in the survey envisaged sales to rebound to their previous levels in around nine months. More than 40 per cent of those surveyed took the view that prices could fall by more than 4 per cent.
UK government defends decision not to lock down care homes sooner
Camilla Hogdson in London
The UK’s health minister has defended the government’s decision not to lockdown care homes sooner, saying there was “no evidence of community transmission” before mid-March, when non-essential visits were stopped.
Edward Argar said ministers acted on the scientific advice they were given, which was that the spread of Covid-19 was “contained” until March 13. Contact tracing up until that point meant “the system knew who’d got it,” he told the BBC.
From that day onwards – when contact tracing was stopped – community transmission began to occur and the government moved from a contain to delay phase, he said. At that point, non essential visits to care homes were stopped.
“I completely refute the assertion that it was bad advice or it was poor advice,” he added.
Asked why the UK did not follow Italy in locking down homes earlier in March, he said: “Italy was ahead of us in terms of the curve… they did this at a point where they had community transmission.”
Fall in oil demand set to be less severe than predicted
Anjli Raval, Senior Energy Correspondent
The International Energy Agency said the drop in oil demand this year will not be as severe as initially thought as governments ease coronavirus lockdown measures, but the body warned that a resurgence of outbreaks are a risk to a “gradual-but-fragile” recovery.
Oil consumption will fall this year by the biggest amount ever at 8.6m barrels a day, although this estimate for the decline is less than last month’s forecast of 9.3m b/d. This will take total demand in 2020 to 91.2m b/d, from about 100m b/d last year.
“Businesses are starting to reopen gradually and people are returning to work, which will provide a boost to oil demand,” the Paris-based body said in its monthly oil market report.
Singapore struggles to tamp down infections in foreign worker housing
Stefania Palma in Singapore
Singapore on Thursday provisionally reported 752 new coronavirus cases as the city state struggles to stem an outbreak in foreign worker dormitories that has kept the country’s daily infection tally in the high triple digits.
The health ministry said the vast majority of Thursday’s patients were linked to dormitories where migrant workers tend to live in cramped quarters. Only two cases are Singaporean citizens or permanent residents.
Lawrence Wong, national development minister and co-chair of Singapore’s coronavirus taskforce, this week said the number of infections in dormitories will remain high as the government ramps up testing, while figures for patients outside these structures are “steadily coming down”.
Patients living in dormitories account for about 90 per cent of Singapore’s overall 26,098 cases, the third highest in Asia. The number of infected dormitory residents has almost doubled in the past fortnight.
European bourses slump on bleak outlook from US Fed
European stock markets tumbled in early trading on Thursday, as hopes for a quick recovery from the coronavirus pandemic faded after the head of the US central bank warned of long-term damage to the world’s biggest economy.
London’s FTSE 100 fell 1.3 per cent, while Frankfurt’s Xetra Dax dropped 1.1 per cent, following Jay Powell’s comments on the severity of the economic downturn that is being caused by the virus and a UN projection that the global economy will contract 3.2 per cent this year.
The Fed chair’s assessment came at a time when investors are concerned about the resurgence in infections in countries further ahead in recovery from the virus, as lockdowns begin to be relaxed in other parts of the world.
Asian equities dropped following the comments from Mr Powell. Hong Kong’s benchmark Hang Seng index fell 1.4 per cent, while Japan’s Topix index dropped 1.9 per cent and Australia’s S&P/ASX 200 shed 1.7 per cent.
Losses in Asia followed a rough day on Wall Street on Wednesday. Futures markets pointed to further losses when trading begins in New York later, with the S&P 500 tipped to drop 0.3 per cent.
UK corporate headlines
Lloyd’s of London expects the pandemic to be the most expensive event in history for the insurance market. The group said it would pay out between £3 and £4.3bn, which is on par with 9/11, but warned losses could rise if lockdown continued into another quarter. Separately, Swiss insurer Zurich expects to pay out $750m in claims due to coronavirus.
WHSmith said it did not expect a recovery in trading until at least the autumn. The group, which traditionally benefits from strong sales in airports and railway stations, did not offer guidance for the rest of the year. Currently only around 300 of its 1,775 stores are open.
Hargreaves Lansdown said its assets under management fell 8 per cent in the first four months of the year to £96.7bn, as markets slid over coronavirus fears. The online brokerage attracted £4bn of new business though, and a record level of dealing activity led revenues to rise 13 per cent to £448.1m.
Housebuilder Persimmon will reopen its sales offices from Friday. The company was able to restore 65 per cent of construction work on its sites by the first week of May, although its business in Scotland remains shut under guidelines from the devolved administration.
Anglo-French biotech group Novacyt said its development of a test for Covid-19, which has been approved for emergency use by the World Health Organization, was expected to be “transformational for the business in almost every way” following strong sales and orders for the kits.
Coronavirus ushers in new accounting measure: Ebitdac
Companies are always keen to flatter reported earnings by excluding items that contribute to statutory losses.
Now some have taken this age-old habit a step further, with a new measure of profits that ignores the effects Covid-19 has wrought on their businesses.
FT reporter Nikou Asgari has found a group of businesses that are using the new profit measure of ‘earnings before interest, depreciation, amortisation — and coronavirus’.
The effect of this newly spawned accounting measure is to add back profits they would have made if the virus had never happened.
Read more on this from Nikou here.
Citigroup reports sharp rise in Asian business accounts opened online
Mercedes Ruehl in Singapore
Citigroup has reported a sharp jump in the number of corporate bank accounts opened online in Asia, as businesses stay away from its branches during the pandemic.
The bank said on Thursday that enterprises opened more than 1,000 accounts online in the first three months of 2020 — roughly the same number that were opened online in the three quarters between April and December last year.
It said the practice of accounts set up this way was accelerating in Asia — the number of accounts opened digitally in March was 3.5 times higher than the number set up this way in January.
Many companies are using digital platforms to open accounts as they rejig their supply chains and become more comfortable with digital channels during the coronavirus crisis, according to Sanjeev Jain, regional head of digital channels for Citi’s treasury and trade solutions business.
Half of the new accounts were in Singapore and Hong Kong but the surge was also due to the “Digital Onboarding” option being launched in new markets including India, Philippines, Malaysia, Indonesia and Thailand during the period.
The technology, launched globally by the bank in 2018, allows businesses to cut the time it takes to open an account from several weeks to as little as two days.
WHSmith does not see rebound in trading until at least autumn
UK stationer WHSmith said that while it is planning for a phased re-opening of its stores in airports, train stations and hospitals, it does not expect any recovery in trading until at least the autumn.
The FTSE 250 group said there will be a gradual improvement in air passenger numbers from autumn onwards, initially led by an increase in domestic travellers in the US, with a similar pattern in rail.
In the UK, it said its stores in hospitals have seen a fall in sales because of sharply reduced numbers of people in hospital for reasons other than Covid-19.
The company said it was still not possible to provide revenue or profit guidance for the remainder of the year.
Currently only around 300 of its 1,775 stores are open, and most of its travel division – which makes over three-fifths of the group’s profit – is shut because of the pandemic.
Group pre-tax profit for the first half, which ran to the end of February and was only marginally affected by Covid-19, was £63m – down slightly from last year’s £65m. No interim dividend was declared.
The company, whose shares are the worst performers among large UK non-food retailers so far this year, has already secured new banking facilities and raised £162m in additional equity in early April.
Zurich forecasts Covid-19 insurance claims of at least $750m
Oliver Ralph in London
Swiss insurer Zurich expects to pay out $750m in claims due to coronavirus.
This comes after Lloyds of London, the British reinsurance market, forecast “historic” losses for the insurance industry from coronavirus, with payouts that could be “far in excess” of those after 9/11 in 2001 and the combined impact of hurricanes Harvey, Irma and Maria in 2017.
In a trading update on Thursday, Zurich said that it had recognised about a third of those claims in the first quarter, with the rest to come later, although it added that the final figure was “subject to significant uncertainty”.
Zurich also said that Farmers, its US business, would refund about $300m of premiums to policyholders in areas such as motor insurance. Insurers across the US have been handing premiums back to customers because the drop in traffic during the lockdown has led to fewer accidents and so lower insurance claims.
Kamran Hossain, an analyst at RBC Capital Markets, said that the estimate for claims was higher than the $550m he had in his forecasts, but added that “this estimate for the full year looks one of the most comprehensive and forward-looking that we have seen during reporting season”.
George Quinn, Zurich’s chief financial officer, said that the impact on the company would be similar to the cost of Hurricanes Harvey, Irma and Maria in 2017 and added that it was “well equipped to absorb” the costs.
Zurich also revealed on Thursday that the crisis is affecting its ability to sell new insurance policies. The insurer said that premium income in its life insurance business dropped by a tenth in the first quarter because lockdowns in Asia and Brazil hampered its sales channels. Life insurance is often sold face-to-face by agents.
European markets set to open lower
European stock markets are set to fall on Thursday when trading begins, as hopes for a quick recovery from the coronavirus pandemic faded after the head of the US central bank warned of long-term damage to the world’s biggest economy.
Futures for the FTSE 100 point to losses of 0.9 per cent, while Frankfurt’s Xetra Dax is expected to fall 0.8 per cent, following Jay Powell’s downbeat economic assessment.
The S&P 500 is set to drop a further 0.5 per cent when trading opens, adding to its losses on Wednesday.
Asian equities slipped on fears of a prolonged economic recovery. Hong Kong’s benchmark Hang Seng index fell 1.3 per cent, while Japan’s Topix index dropped 1.9 per cent.
Mazda reports 4th-quarter loss as pandemic weakens sales
Kana Inagaki in Tokyo
Mazda fell into a net loss for the fiscal fourth quarter as the coronavirus outbreak sharply eroded sales in China and Europe.
For the January to March quarter, the Japanese carmaker reported a net loss of ¥20.3bn ($190m) from ¥27.8bn profit a year earlier, while revenue fell 7 per cent.
Mazda, which has an alliance with Toyota, withheld its guidance for the new 2020-2021 fiscal year as it continues to wrestle with factory shutdowns and fall-off in car demand caused by the pandemic.
In April, the group suffered a 54 per cent year-on-year fall in global vehicle sales with the fall-off particularly sharp in the US and Europe.
Jefferies, an investment bank, has forecast that Mazda will not pay out a dividend in the new financial year.
Migrant worker deaths underscore plight of vulnerable Indians
Benjamin Parkin in New Delhi
Six migrant labourers killed by a bus in India are the latest people to have perished while attempting to make a long trek back home, provoking public anger as the lockdown continues to expose vulnerable Indians to extreme risk.
They were among 10 who were hit overnight on Wednesday as they walked from the western state of Punjab, where the factory at which they worked closed, to their homes in Bihar in eastern India 600 miles away, according to local media. The accident took place near Muzaffarnagar, about halfway through their journey.
The plight of India’s migrant labourers, who have been left without work or income since India entered lockdown in late March, has snowballed into a humanitarian catastrophe. With interstate transport mostly shut down, many have attempted perilous journeys home on foot.
Last week 16 migrants were run over by a train in western India as they slept on the tracks. The fate of migrant workers and mixed official response has provoked rising public outrage.
In a separate incident on Wednesday night, eight labourers were killed in a truck accident as they made their journey home from western India to Uttar Pradesh in the north.
Korean Air parent to invest $244m in struggling carrier’s shares
Song Jung-a in Seoul
Hanjin Kal, the parent company of Korean Air, said on Thursday it would spend Won300bn ($244m) to buy new shares issued by its struggling airline unit a day after Korean Air announced a Won1tn rights offering plan to stay afloat.
Korean Air, South Korea’s national carrier, is suffering from acute liquidity shortages as the coronavirus pandemic sparks a global industry crisis with weak demand for travel and lockdowns in many countries.
Hanjin Kal, which has a 30 per cent stake in Korean Air, will buy 23m shares issued by its airline unit for Won300bn as Korean Air plans to sell about 79.4m new shares to existing holders in July. The price was initially estimated at Won12,600 per share with the final price to be determined on July 6.
The decision was made at the board meeting on Thursday “to protect the value of our stake in Korean Air and help Korean Air overcome the liquidity crisis”, Hanjin Kal said in a statement.
Airlines worldwide are seeking urgent state support as quarantine plans deepen the industry crisis
Korean Air will receive Won1.2tn from state-run banks.
Airline executives have taken pay cuts of up to 50 per cent while about 70 per cent of its workers have gone on leave for six months as part of the company’s cost-saving efforts.
The International Air Transport Association has estimated that airlines this year would need as much as $200bn in government aid and bailout measures for survival while CAPA Centre of Aviation, a consultancy, warned that most carriers would go bankrupt by the end of May unless they received financial support.
Shares of Korean Air fell 1.9 per cent on Thursday, and have slumped nearly 40 per cent so far this year. HanJin Kal shares gained 1.5 per cent while the benchmark Kospi Composite Index lost 0.9 per cent.
Pandemic to slash global output by $8.5tn, UN agency warns
The global economy is projected to contract by 3.2 per cent this year due to the coronavirus pandemic, according to a UN report issued on Wednesday.
The report, World Economic Situation and Prospects as of mid-2020, said the global economy was expected to lose nearly $8.5tn in output over the next two years, wiping out nearly all gains of the previous four years.
The UN Department of Economic and Social Affairs, which issued the report, estimated that gross domestic product growth in developed economies was expected to plunge to minus 5 per cent in 2020. Growth of 3.4 per cent was expected in 2021.
The output of developing countries would shrink by 0.7 per cent in 2020, Desa said.
World trade was forecast to fall by nearly 15 per cent in 2020 amid sharply reduced global demand and disruptions to global supply chains.
The Desa report said the pandemic was likely to put about 34.3m people below the extreme poverty line in 2020, with 56 per cent of this increase occurring in Africa.
An additional 130m people, it added, might join the ranks of people living in extreme poverty by 2030.
Chinese automaker to set up unit in coronavirus-hit northern Italy
Christian Shepherd in Beijing
Chinese state-owned automaker FAW has announced plans to invest €1bn to set up a design centre for electric cars in coronavirus-hit northern Italy.
The carmaker, also known as First Automobile Works, will establish a new company in the Emilia-Romagna region to develop luxury electric and plug-in hybrid vehicles, it said in a joint statement.
FAW said the centre, which will be established as a joint venture with US-based startup Silk EV, would create thousands of jobs in the region. A partner company will also be set up in Jilin province, where FAW is headquartered.
Founded in 1953, FAW, or First Automotive Works, is the original carmaker of the People’s Republic. It makes Red Flag sedans, a model historically favoured by top Chinese Communist party officials.
The move is FAW’s first investment outside China, it said.
The Covid-19 pandemic has worsened a downturn in China’s car market, with the country’s leading industry association predicting a best case scenario of 15 per cent contraction for total sales in 2020.
New Zealand to set up $30bn Covid-19 recovery fund
Jamie Smyth in Sydney
New Zealand will establish a NZ$50bn (US$30bn) Covid-19 recovery and investment fund to help rebuild its economy following an unprecedented 20 per cent decline in economic activity in the June quarter, the government said on Thursday.
The fund will disburse the largest stimulus in the Pacific nation’s history over three years by extending an existing wage subsidy scheme to keep more workers in employment and pay for a range of business support schemes and new infrastructure projects.
Wellington hopes to save 140,000 jobs through the massive spending programme, which will more than double government debt by 2023.
New Zealand’s Treasury will issue NZ$60bn in bonds in 2020-21 and a further NZ$105bn over the following three years to finance the stimulus programme, an increase of NZ$50bn on previous forecasts, according to budget documents.
Grant Robertson, New Zealand’s treasurer, said the 2020 budget was being delivered in a “one-in-100-year” threat to the wellbeing of communities and the economy.
Mr Robertson, pictured delivering his Budget address on Thursday, said the recovery fund would play a critical role in enabling New Zealand to meet the coming economic struggle.
After imposing one of the world’s strictest lockdowns in mid-March, New Zealand may be on course to eliminate the coronavirus, reporting no new cases for three successive days this week. But the closure of most businesses and schools has had a devastating economic impact with budget forecasts showing the economy contracted 20 per cent in the June quarter.
On an annual basis New Zealand’s gross domestic product is forecast to decline 4.8 per cent in the year to end June, compared to a 2.8 per cent increase in the previous 12 months. Annual growth rates are forecast to return to positive from the year ending September 2021 onwards, according to Treasury forecasts.
Unemployment is forecast to increase significantly, rising to 8.3 per cent in the year ending June 2020, before peaking at 9.8 per cent in September 2020 and then recovering thereafter.
Budget deficits are forecast to average 9.3 per cent between 2020 and 2022 before reducing to 1.3 per cent of GDP by 2024. Government debt is forecast to be 30.2 per cent by the end of June, and to reach 53.6 per cent of GDP by the 2023 fiscal year before stabilising.
“Running operating deficits and allowing net core Crown debt to increase in the short term is necessary. This level of investment in the short term will support the economy recovering to where we can return to a more sustainable fiscal position,” said Mr Robertson.
UK task force to examine reuse of medical respirator masks
Leslie Hook and Sarah Neville in London
The UK government has formed a task force to examine reusing medical respirator masks, including decontamination methods that would enable single-use masks to be safely worn many times.
The cross-agency task force includes the NHS, the Health and Safety Executive, the Medicines and Healthcare Products Regulatory Agency (MHRA) and the public health agencies of all four UK nations, according to people involved in the research.
Reusing respirator masks after decontamination is already a widespread practice in the US, which has experienced severe shortages of N95 masks, and it was recently approved in Canada and Norway.
The UK task force, which has been under way since late March, is expected to issue guidance on how to safely reuse medical respirator masks, if necessary. Several people close to the group said it was not a response to an imminent mask shortage.
Read more here
Qatar threatens 3 years’ prison for not wearing a mask
The Gulf state of Qatar on Thursday declared that face masks are mandatory for anyone going outside from May 17, state media reported.
Violators could be sentenced to as much as three years in prison, Qatar News Agency reported, as well as face a fine of up to QR200,000 ($55,000).
The law compels “all citizens and residents upon leaving the house for any reason to wear masks, except in the case when a person is alone while driving a vehicle”, QNA quoted the interior ministry as saying.
China’s north-east seeks to ward off virus resurgence
Christian Shepherd in Beijing
China’s Liaoning province has reported two new locally transmitted cases of coronavirus, as the country’s north-east steps up efforts to avoid a resurgence.
The infections were both confirmed in Shenyang, Liaoning’s capital, one of which had previously been classed as an asymptomatic case, the National Health Commission announced on Thursday.
The commission reported one other locally transmitted case in Jilin province, bringing China’s total number of active Covid-19 infections to 101, mostly imported cases.
The discovery last week of a cluster of Covid-19 infections in Jilin, adjacent to Liaoning, has set off a flurry of new travel restrictions, testing and contact tracing across China’s north-eastern provinces.
The region became a frontline of China’s efforts to ward off a second wave last month, after hundreds of infections were confirmed among travellers entering the country from Russia.
South Korean clubbing area cases rise to 120 after 24,000 tests
Edward White in Wellington and Kang Buseong in Seoul
At least 120 people have now been confirmed as infected in an outbreak linked to the popular Itaewon nightlife district in Seoul, highlighting concerns for other governments as they take the first steps to lift crippling lockdowns.
A move to anonymous testing means South Korea has now managed to test more than 24,000 people linked to the coronavirus cluster, as officials desperately try to suppress a new wave of the virus.
There had been rising fears that thousands of people were avoiding being tested because of privacy concerns, after local media and online commentary linked the outbreak to venues popular with the LGBT+ community, sparking a spate of homophobic abuse.
“The anonymous tests are taking effect. Since the introduction, the number of tests has jumped eight-fold,” Seoul mayor Park Won-soon told local radio.
According to the Korea Centers for Disease Control on Thursday, the number of new confirmed infections increased by 29.
The country, which continues to win international praise for its handling of the virus, has recorded 10,991 infections of which 260 have died and 9,762 people have fully recovered.
Asia-Pacific shares fall after Fed warns on long-term outlook
Daniel Shane in Hong Kong
Shares across Asia-Pacific fell after the US central bank warned of long-term damage to the world’s biggest economy from the coronavirus pandemic, pouring cold water on investor optimism for a V-shaped rebound in global activity.
In early trading in the region on Thursday, Japan’s Topix stock index slipped 0.7 per cent, while Australia’s S&P/ASX 200 and South Korea’s Kospi fell by 1.3 per cent and 1.2 per cent, respectively.
The weakness in the region’s equity markets came after US Federal Reserve chair Jay Powell on Wednesday signalled “lasting damage to the productive capacity of the economy” and that the US risked an “extended period of low productivity growth and stagnant incomes”.
Wall Street reacted poorly to Mr Powell’s gloomy prognosis for a post-coronavirus recovery, with the S&P 500 benchmark closing down 1.7 per cent, after having fallen as much as 2.7 per cent during the session. Futures trading pointed to a muted start when Wall Street opens again later on Thursday.
Global equity markets have rebounded powerfully from their March lows as investors were buoyed by unprecedented monetary and fiscal support measures. But that narrative has faced increased opposition this week, as investors have begun to contemplate a much more drawn out recovery from the global health crisis, as well as emerging signs of new tensions between Beijing and Washington.
The yields on the US 10-year sovereign bond fell 1 bps to 0.641 per cent. Mr Powell appeared to rule out a move to negative interest rates in the US — a move which President Donald Trump has urged the central bank to consider. Bond yields fall as prices rise.
Stock trading in Hong Kong and mainland China begins later in the morning.
Crude was little changed on Thursday. West Texas Intermediate, the US benchmark, added 0.6 per cent to $25.45.
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Trump labels Fed’s Powell as his ‘most improved player’
Peter Wells in New York
Donald Trump has described Jerome Powell as his “most improved player” for the Federal Reserve chairman’s swift moves in cutting interest rates in the US to near zero to support the economy through the pandemic.
“He has done a very good job over the last couple of months, I have to tell you that,” the president said at the White House on Wednesday.
“Because I have been critical but in many ways I call him my MIP. Do you know what an MIP is? It’s the most improved player.”
The comments bestow upon Mr Powell an honour typically reserved for hard-working professional basketballers, such as Giannis Antetokounmpo of the Milwaukee Bucks, but also represents an improvement in the president’s sentiment towards the head of the Fed. Mr Trump last year said via Twitter message that the central bankers were “Boneheads” for not, at the time, cutting ” interest rates down to ZERO, or less”.
The path to potential Most Valuable Player status in the president’s eyes may prove elusive for Mr Powell. Mr Trump said he only disagrees with him on one thing – negative rates – even though the Fed chair said earlier today he had little interest in taking borrowing costs below zero.
“I’m a believer in negative rates only if other countries that are competitors,” Mr Trump said. “Look, Germany, they’re an ally, they’re friends of ours, they’re still competitors on other things. So, Germany, Japan, others have negative rates and I think if they do, we’re the most prime of the world.”
“Certainly, if they have the advantage of negative rates, we should, too.”
US death toll jumps to more than 78,000
Peter Wells in New York
The number of coronavirus deaths in the US rose at the quickest rate in about a week, pushing the national total above 78,000.
A further 1,726 people in the US died over the past 24 hours, according to data compiled on Wednesday by the Covid Tracking Project, which was the largest daily increase since a record of 2,746 on May 7.
New Jersey and Illinois led the increase, with 194 and 191 deaths over the past day, respectively. Massachusetts, with 174, saw the third highest daily rise.
New York, the hardest hit state overall, slipped down the rankings with a further 168 deaths over the past 24 hours.
Since the pandemic began, 78,343 people in the US have died from coronavirus, according to the Covid Tracking Project.
Australians deliver scathing judgment of Trump’s coronavirus response
Jamie Smyth in Sydney
Australians strongly support their government’s handling of the coronavirus crisis but have delivered a scathing assessment of the responses by the US, UK and China, according to a new poll.
Nine in 10 Australians said the nation had handled the pandemic “very well” or “well”, providing a big boost to Scott Morrison, the prime minister, who was severely criticised for his response to the bushfire emergency in January.
In contrast, just one in 10 people said the US had handled the crisis either “well” or “very well” and almost three-quarters of respondents said they wanted Joe Biden, the presumptive Democratic challenger to Donald Trump, to win the US election in November.
The crisis has also tempered Australians’ expectations of China’s growing power, with just 37 per cent of people saying Beijing would be “more powerful” than it was before the crisis and a quarter saying it would be “less powerful”.
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