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Pandemic brings lasting changes to city centres



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Société Générale shuts branches and increases focus on online banking

Today’s news that France’s Société Générale will shut 600 branches as part of a cost-cutting drive is just the latest example of how the pandemic is not only accelerating changes in the way we do business but also bringing major changes to our built environments. 

The move follows similar decisions across Europe from the likes of ABN Amro, Deutsche Bank, HSBC and Svenska Handelsbanken. 

As with so many other sectors, the shift to online banking did not start with the public health crisis but has certainly been turbocharged by it.

Retail has been the most obvious example. Today we report a trebling of losses at Ted Baker and news that even the Queen’s coffers — Her Majesty is a big commercial landlord via the Crown Estate — have been hit by the enforced closures of stores and restaurants. Online beauty retailer The Hut Group, meanwhile, has increased its full-year sales forecasts for the second time since September as digital sales rocket. 

But beyond the distress of individual retailers, as our Big Read explains, the crisis has led to a wider discussion on the very purpose of city centres and how they might look in the future. The crisis is particularly acute in the UK where town planning for so long was entwined with the expansion of big retail at the expense of small businesses. Now the industry is in crisis, retail landlords can either slash rents in search of new tenants or repurpose stores for other uses. 

Office space is another area ripe for a rethink, argues columnist Pilita Clark, not least because surveys indicate staff want to keep working at home — at least for part of the week — once the pandemic is over.

Remodelling of workspaces to do away with the distraction of open-plan design, adding more meeting rooms and providing more privacy for workers could actually turn the office into a vastly better version of what it was before Covid-19, she writes.


The European Central Bank on Thursday is expected to increase its €1.35tn emergency asset purchase programme by another €500bn. Investors are betting the bank will do what it takes to keep EU borrowing costs low, writes capital markets correspondent Tommy Stubbington. An EU summit on Thursday and Friday — as well as contemplating the final outcome of Brexit talks — will continue the debate about the bloc’s coronavirus recovery fund.

Line chart of 10-year yield spreads versus Germany (percentage points) showing shrinking spreads in the eurozone

Consultancy PwC says the pandemic will lead to structural changes in the asset management industry, as infrastructure, private markets and a business focus on sustainability lead to new revenues. If coronavirus vaccination triggers a rapid economic recovery, assets overseen by investment managers could increase 5.6 per cent a year to hit $147.4tn by the end of 2025.

Absolute return funds — those that promise results in all circumstances — have performed particularly badly during the crisis. Investors’ frustration that the all-weather funds failed to shield them from the pandemic shock could hasten the end of the products, once one of the asset management industry’s hotspots.


The strength of digital media has helped the global advertising market overcome the serious downturn in traditional marketing and could potentially deliver a rebound of 6.2 per cent in 2021. There are still casualties from the pandemic: Japan’s Dentsu — the world’s fifth-largest ad company and suffering greatly from the postponement of the Tokyo Olympics — is cutting 6,000 of its overseas jobs.

Airbnb’s decision to go public — trading begins in the accommodation booking company’s shares on Thursday — gives us an interesting opportunity to gauge investor thinking on the future of a travel industry ravaged by the pandemic. At the more traditional end of the sector, Hyatt Hotels today announced plans to expand in Europe, hoping that post-vaccine demand can compensate for its losses during the crisis.

Fintech groups in the Middle East have benefited from the drive towards online financial services caused by the pandemic. From a low base, the sector is growing 30 per cent a year in a region where the young are swift to adopt new technologies but where millions have been overlooked by banks and wealth managers. Read more in our special report: The future of telecommunications

Global economy

China’s export success, supported by demand for pandemic-related products such as personal protective equipment and gear for working at home, continued with a 21 per cent jump in November compared with last year, pushing the country’s trade surplus to record levels. Things are less rosy in Hong Kong where its top financial official said the pandemic had “derailed the city’s economy”.

Forecast-beating industrial production data in Germany — including an almost 10 per cent jump in carmaking — raised hopes that Europe’s largest economy could avoid a double-dip recession.

A decision on a new US stimulus bill is inching closer. The current proposal includes $288bn in small business aid, $180bn in unemployment benefits, $160bn for hard-hit local governments and help for stricken business sectors such as airlines. President-elect Joe Biden today unveiled his team to tackle the pandemic.

Have your say

Coronavirus vaccines mean light at the end of the tunnel at last. But there’s a long way to go before the world can say goodbye to pandemic disruptions. Can governments roll out vaccine programmes swiftly, efficiently and fairly? And who should have priority? Please share your views with us — email us at Thanks

AdamC comments on Here’s what the office of 2021 should look like:

Amen on the meeting rooms point from me. Office designers seem to chronically underestimate the need for private meeting rooms and overestimate the need for trendy, open collaboration-type spaces, which seem to sit largely unused.

It is particularly hard for people who have people management responsibilities, or who work in sensitive functions like HR or finance. These workers cannot discuss much of their work in a café-style booth next to the lunchroom or wherever!

The essentials

Business education correspondent Jonathan Moules looks at how family businesses have coped with the pandemic and offers some tips from experts on how they can balance short-term pressures against long-term opportunities.

The UK’s NHS will administer the first doses of its Pfizer/BioNTech vaccine on Tuesday. One in three UK adults will not accept a vaccine, a poll has found.

Final thought

From European Commission president Ursula von der Leyen to Wuhan diarist Fang Fang, the FT’s Women of 2020 series celebrates the politicians, scientists, activists and authors who have inspired us during a difficult year.

We would really like to hear from you. Please send your reactions or suggestions to Thanks

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US stocks rise as investors weigh strong earnings against spread of Delta variant




Equities updates

Stocks on Wall Street edged higher on Tuesday as strong company earnings and economic data offset worries about the spread of the Delta coronavirus variant and fears over another regulatory clampdown from Beijing.

The blue-chip S&P 500 was up 0.7 per cent by mid-afternoon in New York, its best performance in more than a week. The tech-focused Nasdaq Composite climbed 0.3 per cent.

Investor sentiment was lifted by June data for US factory orders, which typically feed into estimates of gross domestic product. New orders for goods rose 1.5 per cent on the month before, well above the consensus estimate of 1 per cent.

In Europe, another wave of strong earnings results helped propel the continent’s stocks to a fresh record. The region-wide Stoxx 600 index rose 0.2 per cent after Paris-based bank Société Générale and London-listed lender Standard Chartered reported profits that beat analysts’ expectations.

London’s energy-leaning FTSE 100 index rose 0.4 per cent, aided by oil major BP, which rallied after announcing a $1.4bn share buyback programme and an increase in its dividend.

Line chart of Stoxx Europe 600 index showing Strong earnings help propel European shares to record high

On both sides of the Atlantic, earnings have been strong. More than halfway through the US reporting season, 86 per cent of companies have topped expectations on profits, while in Europe 55 per cent have outperformed so far, according to data from FactSet and Morgan Stanley.

“The continued healthy earnings outlook is a key driver of our view that the equity bull market remains on solid footing,” analysts at UBS Wealth Management wrote in a note. Such a growth rate is, however, “flattered by depressed levels in the year-ago period,” they said. “But the results are still impressive compared with pre-pandemic earnings.”

Oil slipped in a choppy session as the global benchmark Brent crude fell 0.7 per cent to $72.37 a barrel on fears that the spread of the Delta variant could depress demand for fuel.

The seven-day rolling average for new coronavirus cases in the US, the world’s largest economy, have hit nearly 85,000 from about 13,000 a month ago, according to the Financial Times coronavirus tracker. Similar trends have taken hold in other countries as well as authorities race to vaccinate larger swaths of their populations.

A log-scale line chart of seven-day rolling average of newcases showing that US coronavirus case counts rise from just over 10,000 in mid-June to nearly 100,000 by early August

In Asia, investors were again focused on regulation after Chinese state media criticised the online video gaming industry, calling it “spiritual opium”. Shares in Tencent, the Chinese internet group, fell 6 per cent before announcing it would implement new restrictions for minors on its gaming platform. NetEase and XD, two rivals, dropped 7.8 per cent and 8.1 per cent, respectively.

The Hang Seng Tech index, which includes Tencent and its peers, dropped 1.5 per cent, lagging behind the wider Hong Kong bourse, which slipped 0.2 per cent. The CSI 300 index of large Shanghai- and Shenzhen-listed stocks was flat.

Unhedged — Markets, finance and strong opinion

Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday

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Why it might be good for China if foreign investors are wary




Chinese economy updates

The writer is a finance professor at Peking University and a senior fellow at the Carnegie-Tsinghua Center for Global Policy

The chaos in Chinese stock markets last week was exacerbated by foreign investors selling Chinese shares, leaving Beijing’s regulators scrambling to regain their confidence while they tried to stabilise domestic markets. But if foreign funds become more cautious about investing in Chinese stocks, this may in fact be a good thing for China.

In the past two years, inflows into China have soared by more than $30bn a month. This is partly because of a $10bn-a-month increase in the country’s monthly trade surplus and a $20bn-a-month rise in financial inflows. The trend is expected to continue. Although Beijing has an excess of domestic savings, it has opened up its financial markets in recent years to unfettered foreign inflows. This is mainly to gain international prestige for those markets and to promote global use of the renminbi.

But there is a price for this prestige. As long as it refuses to reimpose capital controls — something that would undermine many years of gradual opening up — Beijing can only adjust to these inflows in three ways. Each brings its own cost that is magnified as foreign inflows increase.

One way is to allow rising foreign demand for the renminbi to push up its value. The problem, of course, is that this would undermine China’s export sector and would encourage further inflows, which would in turn push China’s huge trade surplus into deficit. If this happened, China would have to reduce the total amount of stuff it produces (and so reduce gross domestic product growth).

The second way is for China to intervene to stabilise the renminbi’s value. During the past four years China’s currency intervention has occurred not directly through the People’s Bank of China but indirectly through the state banks. They have accumulated more than $1tn of net foreign assets, mostly in the past two years.

Huge currency intervention, however, is incompatible with domestic monetary control because China must create the renminbi with which it purchases foreign currency. The consequence, as the PBoC has already warned several times this year, would be a too-rapid expansion of domestic credit and the worsening of domestic asset bubbles. 

Many readers will recognise that these are simply versions of the central bank trilemma: if China wants open capital markets, it must give up control either of the currency or of the domestic money supply. There is, however, a third way Beijing can react to these inflows, and that is by encouraging Chinese to invest more abroad, so that net inflows are reduced by higher outflows.

And this is exactly what the regulators have been trying to do. Since October of last year they have implemented a series of policies to encourage Chinese to invest more abroad, not just institutional investors and businesses but also households.

But even if these policies were successful (and so far they haven’t been), this would bring its own set of risks. In this case, foreign institutional investors bringing hot money into liquid Chinese securities are balanced by various Chinese entities investing abroad in a variety of assets for a range of purposes.

This would leave China with a classic developing-country problem: a mismatched international balance sheet. This raises the risk that foreign investors in China could suddenly exit at a time when Chinese investors are unwilling — or unable — to repatriate their foreign investments quickly enough. We’ve seen this many times before: a rickety financial system held together by the moral hazard of state support is forced to adjust to a surge in hot-money inflows, but cannot adjust quickly enough when these turn into outflows.

As long as Beijing wants to maintain open capital markets, it can only respond to inflows with some combination of the three: a disruptive appreciation in the currency, a too-rapid rise in domestic money and credit, or a risky international balance sheet. There are no other options.

That is why the current stock market turmoil may be a blessing in disguise. To the extent that it makes foreign investors more cautious about rushing into Chinese securities, it will reduce foreign hot-money inflows and so relieve pressure on the financial authorities to choose among these three bad options.

Until it substantially cleans up and transforms its financial system, in other words, China’s regulators should be more worried by too much foreign buying of its stocks and bonds than by too little.

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Square to acquire Afterpay for $29bn as ‘buy now, pay later’ booms




Square Inc updates

Payments company Square has reached a deal to acquire Australian “buy now, pay later” provider Afterpay in a $29bn all-stock transaction that would be the largest takeover in Australian history.

Square, whose chief executive Jack Dorsey is also Twitter’s CEO, is offering Afterpay shareholders 0.375 shares of Square stock for every share they own — a 30 per cent premium based on the most recent closing prices for both companies.

Melbourne-based Afterpay allows retailers to offer customers the option of paying for products in four instalments without interest if the payments are made on time.

The deal’s size would exceed the record set by Unibail-Rodamco’s takeover of shopping centre group Westfield at an enterprise value of $24.7bn in 2017.

The transaction, which was announced in a joint statement from the companies on Monday, is expected to be completed in the first quarter of 2022.

Afterpay said its 16m users regard the service as a more responsible way to borrow than using a credit card. Merchants pay Afterpay a fixed fee, plus a percentage of each order.

The deal underscored the huge appetite for buy now, pay later providers, which have boomed during the coronavirus pandemic.

“Square and Afterpay have a shared purpose,” said Dorsey. “We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”

Adoption of buy now, pay later services had tripled by early this year compared with pre-pandemic volumes, according to data from Adobe Analytics, and were particularly popular with younger consumers.

Rivalling Afterpay is Sweden’s Klarna, which doubled its valuation in three months to $45.6bn, after receiving investment from SoftBank’s Vision Fund 2 in June. PayPal offers its own service, Pay in 4, while it was reported last month that Apple was looking to partner with Goldman Sachs to offer buy now, pay later facilities to Apple Pay users.

Steven Ng, a portfolio manager at Afterpay investor Ophir Asset Management, said the deal validated the buy, now pay later business model and could be the catalyst for mergers activity in the sector. “Given the tie-up with Square, it could kick off a round of consolidation with other payment providers where buy now, pay later becomes another payment method offered to their customers,” he said.

Over the past two years Afterpay has expanded rapidly in the US and Europe, which now account for more than three-quarters of its 16.3m active customers and a third of merchants on its platform. Afterpay said its services are used by more than 100,000 merchants across the US, Australia, Canada and New Zealand as well as in the UK, France, Italy and Spain, where it is known as Clearpay.

Square intends to offer the facility to its merchants and users of its Cash App, a fast money transfer service popular with small businesses and a competitor to PayPal’s Venmo.

“It’s an expensive purchase, but the buy now, pay later market is growing very rapidly and it makes a lot of sense for Square to have a solid stake in it,” said retail analyst Neil Saunders.

“For some, especially younger generations, buy now, pay later is a favoured form of credit. Afterpay has already had some success with its US expansion, but Square will be able to accelerate that by integrating it into its platforms and payment infrastructure — that’s probably one of the justifications for the relatively toppy price tag of the deal.”

Square handled $42.8bn in payments in the second quarter, with Cash App transactions making up about 10 per cent, according to figures released on Sunday. The company posted a $204m profit on revenues of $4.7bn.

Once the acquisition is completed, Afterpay shareholders will own about 18.5 per cent of Square, the companies said. The deal has been approved by both companies’ boards of directors but will also need to be backed by Afterpay shareholders.

As part of the deal, Square will establish a secondary listing on the Australian Securities Exchange to provide Afterpay shareholders with an option to receive Square shares listed on the New York Stock Exchange or the ASX. Square may elect to pay 1 per cent of the purchase price in cash.

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