Connect with us

Markets

Consumers splash the cash ahead of holidays

Published

on


The FT is offering a free 30-day trial to Coronavirus Business Update, which includes access to FT.com. Please spread the word by forwarding this newsletter to friends and colleagues who you think would find it valuable. And if this has been forwarded to you, hello. Please sign up here

This is the last Coronavirus Business Update of 2020. We will return on January 4. We wish you a healthy and happy seasonal holiday and look forward to continuing keeping you updated in the new year.

Latest news

Signs of renewed economic activity in UK and US even as infections rise

Consumers rushed out to splash the cash in shops, pubs and restaurants after November’s coronavirus lockdown ended in England, resulting in the fastest rate of consumer spending growth this year, according to the latest data tracking bank transactions.

Figures from Fable Data, based on card transactions and bank payments, show that consumer expenditure in the UK was up 9.4 per cent in the week ending December 13 compared with the same period a year ago.

Line chart of annual consumer spending change (%) showing a sharp rise in UK consumer spending after England’s November lockdown ended

Even as coronavirus infections intensified across Europe and the US, there were broader signs of renewed economic activity towards the end of the year in a number of countries.

Sales of British Christmas trees were up 15 per cent, reflecting the mixture of a traumatic mink cull in Denmark that affected supply chains and deterred wholesale buyers, disruption at ports ahead of the end the Brexit transition, and a campaign to buy local.

FedEx has revealed the scale of the online shopping boom in the run-up to the US holiday season peak, reporting its highest quarterly sales on record after the logistics group handled millions of additional packages and implemented surcharges on shipments.

Elsewhere, Gucci will launch two online stores in China alongside ecommerce group Alibaba, as the high-end brand counts on a post-coronavirus boom in luxury goods spending in the country to offset sluggish sales in the west.

But the academic Adam Tooze warns that while scientists may have provided a miraculous fix for Covid-19, history shows that any path to recovery will be long.

Reflecting the spirit of seasonal goodwill, he says we should “forgo austerity measures in favour of generous crisis relief for those most in need, and long-term investment in the transition to green energy”.

For the latest coronavirus news visit our live blog

Markets

Absolute Strategy Research, an investment consultancy, found in its latest quarterly survey of 200 asset allocators, chief investment officers, investment strategists and economists, that 71 per cent thought global equities would be higher in a year’s time. This created the “risk of groupthink”, it warned.

Line chart of IPO volumes by deal value ($bn) showing that London lags leading exchanges for new listings

While the City of London remains a global superpower in a number of areas of finance, its stock market is struggling with weak returns and a lack of big tech stocks. Lacking the megacap tech stocks that dominate in the US and China, the FTSE 100 is now trading at one of the widest price-to-earnings discounts to the S&P 500 for 15 years. This is part of our Future of the City series.

The Federal Reserve’s emergency lending programme for small and midsize businesses has recorded a jump in demand with just weeks to go before it is shut down over the objections of the US central bank. For the week ending Wednesday, the Fed lent out an additional $2.7bn through the Main Street Lending Program, created to help struggling businesses that are not big enough to access the bond market.

Business

Restaurant owners have highlighted the crippling effects of a second lockdown within six months in England as well as tough restrictions still in place across the UK. The Restaurant Group, which owns chains including Wagamama and Frankie & Benny’s, reported higher cash burn during England’s second lockdown. Fulham Shore, which owns Franco Manca and The Real Greek, posted first-half revenue down 45 per cent to £19.9m.

The US Food and Drug Administration will grant emergency approval to the Moderna coronavirus vaccine in the coming days, making it the first country to have authorised two inoculations against the virus. The EU has requested a further 80m doses from the company, doubling the size of its orders.

Barclays retail bank chairman Ian Cheshire is stepping down after four years helping to establish and lead the UK unit of the lender, which is set for a major overhaul in the coming years after its profits collapsed amid coronavirus. Sir Ian, 61, will be replaced by Crawford Gillies at the end of the year and will leave the board in May.

Global economy

Vendors have been offering coronavirus vaccines for sale on hidden parts of the internet days after the first Covid-19 shot was approved this month, as criminals seek to profit from global demand for inoculations. Experts said that many of the vaccines for sale on the dark web were either fake or would never be shipped. 

A political flare-up over the Federal Reserve’s pandemic crisis lending programmes has emerged as a late stumbling block to a $900bn fiscal stimulus package as US congressional leaders rushed to complete the deal. Pat Toomey, a Republican senator, sought to insert a provision in the legislation that would prevent the Fed from reviving several emergency credit facilities that are due to expire at the end of the year.

Line chart of monthly UK property transactions, above £40,000 (thousands) showing that the UK housing market saw a strong 'V'-shaped recovery after lockdown

The feverish demand for UK property has stood out in the gloom of the wider economy. After lockdown brought the homebuying process to a near standstill in March, it roared back to life from May, fuelled by the desire for bigger, more comfortable properties triggered by the shift to working from home and the nine-month stamp duty holiday announced in July.

The essentials

Follow our coronavirus vaccine tracker, updated every week, as well as our global economic impact tracker and our coronavirus tracker on the spread of infection around the world.

Final thought

John le Carré, the spy fiction master
John le Carré, the spy fiction master ©  Greg Funnell/Camera Press | John le Carré

Simon Schama argues that John le Carré, the spy fiction master, ventured well beyond the shadows of espionage to become one of the most perceptive and enduring writers of his age. His writing was “often surprisingly tender amid the carnage, exactingly watchful, brimming with sensuous plenitude, even on rain-sodden city streets, and with the bloody beat of life pounding away on every page”.

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



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets

UK listings/Spacs: the crown duals

Published

on

By



City-boosting proposals are not enough to offset lack of EU financial services trade deal



Source link

Continue Reading

Markets

How Jennifer Granholm will reshape the US Department of Energy

Published

on

By


Two things to start: ExxonMobil appointed two new directors to its board, its latest effort to placate activist shareholders. And Texas’s largest power co-op Brazos Electric went bust yesterday, as the financial damage from the arctic storm continues to mount.

Oh, and after the hiatus caused by the pandemic, energy-related emissions are rising again, according to the International Energy Agency. They were higher in December than a year previously, the agency said.

Welcome to another Energy Source. Our main item today is on Jennifer Granholm, whom the US Senate last week confirmed as the country’s new energy secretary. Myles McCormick reports on her plan to revitalise her department and reorient it towards clean energy.

Thanks for reading. Please get in touch at energy.source@ft.com. You can sign up for the newsletter here. — Derek

Granholm looks to reboot the Department of Energy

From scuppering the Keystone XL pipeline to freezing the allocation of new drilling leases on public lands, Joe Biden’s plans to shake up the American energy system are well under way.

Next on the president’s agenda is an overhaul of the sprawling leviathan that is the US Department of Energy. And the woman that will lead that process is now in situ.

Jennifer Granholm, a former two-term governor of Michigan, took the reins of the $35bn a year government agency five days ago. And already it is clear there will be a shift in its focus — away from promoting fossil fuel exports and towards driving innovation in clean energy and climate technology.

This is what Granholm wrote in a blog post last Thursday, her first day on the job:

“President Biden has tasked the Department, his in-house solutions powerhouse, with delivering a cornerstone of his bold plan: the goal of achieving net-zero carbon emissions by 2050. For DoE, that means developing and deploying the technologies that will deliver a clean energy revolution.”

That will require a shift in priorities at the “in-house solutions powerhouse” — but one that analysts said Granholm was well suited to execute.

“She understands the economic benefits of transforming the agency into the Department of Clean Energy,” said Mitch Bernard, president of the Natural Resources Defense Council.

Jennifer Granholm was sworn in as energy secretary on February 25 © Getty Images

What can the DoE actually do on climate?

American energy policy is divvied up among several government agencies, of which the Department of Energy is just one. Traditionally its primary responsibilities have been the US nuclear weapons programme, environmental clean-ups and scientific research and development through its oversight of the country’s national laboratories.

Despite the department’s name, Granholm’s ability to effect the Biden climate agenda is constrained. She does not have oversight of emissions targets (which fall to the Environmental Protection Agency) or oil and gas drilling licences (the Department of the Interior).

“I do think the DoE’s ability to advance climate goals is fairly limited,” Nader Sobhani, climate policy associate at the Niskanen Center, told ES.

But what it can do is reinvigorate the department’s R&D role.

“I think there will certainly be a shift in the programmatic focus of this DoE as compared to the previous administration, in that there will be a concerted effort to innovate, develop and deploy clean energy technologies that are critical to combating climate change,” said Sobhani.

That means driving forward research on carbon capture and storage, electric vehicle charging infrastructure, energy storage technology and zero-carbon fuels such as green hydrogen.

How will it set about doing this? The department has a few tools in its toolkit:

  • There are the 17 national laboratories, which are hotbeds for tech breakthroughs.

  • There are grant and loan programmes it can use to drive innovation and de-risk new technologies to coax in private sector investment. Granholm has already indicated she will restart a $40bn loan programme that was left untouched by the Trump administration.

  • Plus, it has regulatory authority to encourage energy efficiency in certain appliances and new transmission lines.

But all of this will require funding. While Congress ensured the agency was not financially gutted by the last administration, ramping up its R&D role will require more money. Biden has pledged $400bn over the next ten years for clean energy and innovation.

Granholm’s record on spending big — sometimes without the desired effect — has already sparked criticism from some quarters, with conservatives arguing her selection “should frighten every American taxpayer”.

Jennifer Granholm, former governor of Michigan, speaks during TechCrunch Disrupt 2019 in San Francisco
Jennifer Granholm, former governor of Michigan, speaks during TechCrunch Disrupt 2019 in San Francisco © Bloomberg

New leadership

Just as important as finance will be the shift in tone Granholm will bring.

While money kept flowing under the Trump administration, the agency lacked the strategic drive needed for clean tech innovation, said Emily Reichert, chief executive of Greentown Labs, North America’s biggest start-up incubator.

“When people look back on it, it was an absence of leadership — on innovation, on policy, on decisions, on strategy — that we needed to move forward faster,” she told ES.

The DoE’s role in convening experts from across the US has been central to driving the development of new technology. But as a divided country shifts rapidly towards a new approach to energy, that outreach role will be even more important.

That makes the appointment of Granholm key. A Michigan native, with years of experience dealing with the Detroit auto industry, she will be able to bring the climate change narrative to parts of the country that coastal liberals have often failed to reach.

“I think that Jennifer Granholm coming from a Midwestern perspective is a real game changer in terms of bringing the focus of this activity to the middle of the country, and recognising that the middle of the country can also get engaged in this developing the innovations around climate,” said Reichert.

But most importantly — four years after Donald Trump appointed an energy secretary who thought the department should be scrapped — Granholm’s championing of clean energy should get investors excited to spark the influx of funds needed for the “clean energy revolution” her boss has promised.

“The market signal it sends is that, one, the US is back in the game,” said Reichert. “And two, that climate related technology solutions around decarbonisation are a good place to invest your money, your time, your talents, and to move your assets.”

(Myles McCormick)

Data Drill

The energy transition could lower oil prices in the long term by $10 a barrel — by far the biggest threat to the net present value of oil companies, according to new research from Rystad Energy that assessed the resilience of 25 large operators. The consultancy quantified the risk to NPVs of stranded assets as less than 1 per cent, and that from rising CO2 costs at mostly below 10 per cent.

Oil sands and tight oil companies are most exposed to price risk because of high break-even costs. Oil sands would suffer most from higher CO2 costs. And ExxonMobil’s revenue risk is higher than its supermajor peers’, “primarily because its portfolio includes several large, capital-intensive projects”, including the Permian Basin assets and Guyanese shale.

Bar chart of Impact on net present value (%) showing The energy transition's corporate hit, quantified

Power Points

FT Energy Source Live

The FT Energy Source Live event will be taking place on 24 — 25 May 2021. Join industry CEOs, thought leaders, energy innovators, policymakers, investors and other key influencers to hear the latest thinking and insights on the future of US energy leadership and its global context. Find out more here.

Endnote

IHSMarkit’s CERAWeek, cancelled by the pandemic last year, is back on — and it has a new look.

Keynote speeches and panel discussions have moved from the Hilton’s plush ballrooms in downtown Houston to a slick new web interface. Many have been pre-recorded. Deals that came together in the hotel’s executive suites will have to wait. Journalists are missing the free lunches.

Still, the conference’s agenda boasts a who’s who of the energy industry, and increasingly beyond, as the sector grapples with the low-carbon energy transition — a topic that was scarcely mentioned just a couple years ago.

Andy Jassy, the head of Amazon’s cloud business, who has been picked to succeed Jeff Bezos as the company’s CEO later this year, had some advice that cut to the heart of the dilemma facing oil executives.

“If you want to be a company for a long period of time — which by the way turns out to be really hard to do — you have to be able to reinvent yourself, sometimes several times over,” said Jassy in a session with BP’s Bernard Looney, who pitched his company’s own transition away from oil.

“If something is going to happen, whether it’s good for you or not, if it is good for customers it is going to happen,” added Jassy. “So you have a couple of choices: you can howl at the wind and wish it away as a lot of companies do — big leading companies do — when there are new shifts technology, or you can embrace it.”

Energy Source is a twice-weekly energy newsletter from the Financial Times. It is written and edited by Derek Brower, Myles McCormick, Justin Jacobs and Emily Goldberg.



Source link

Continue Reading

Markets

Hedge fund manager Hohn pays himself $479m

Published

on

By


Billionaire hedge fund manager Sir Christopher Hohn has paid himself a dividend of $479m, one of the largest-ever annual personal payouts in the UK, after profits at his firm more than doubled last year.

Hohn, who is founder of Mayfair-based TCI Fund Management and one of the UK’s biggest philanthropists, made the payment to a company he controls during the year to February 2020, according to regulatory filings.

TCI, which manages more than $45bn in assets and tends to bet on rising rather than falling prices, has been a big winner from the bull market of recent years. During 2019 it made $8.4bn worth of profits for investors, according to LCH Investments, profiting from gains in stocks including Alphabet, Charter Communications and Canadian Pacific Railway.

TCI Fund Management’s profits for the year to February 2020 jumped 108 per cent to $670.9m. The $479m dividend was then paid to a separate firm TCI Fund Management (UK). Both companies are controlled by Hohn.

TCI declined to comment. The payment was first reported by The Guardian.

While the payout beats the £323m paid to Bet365 boss Denise Coates in 2018, much of it has been reinvested in TCI funds, filings show. It is also far from the biggest-ever hedge fund payday, being dwarfed by sums such as the $3.7bn earned by US manager John Paulson in 2007 thanks to bets on the subprime crisis.

In 2014, during testimony in his divorce battle with estranged wife Jamie Cooper-Hohn, Hohn described himself as “an unbelievable moneymaker”. A High Court judge later awarded Cooper-Hohn a $530m divorce payout.

Hohn, who grew up in Surrey and is the son of a Jamaican car mechanic, is known as one of Europe’s most aggressive activist investors. A backer of climate group Extinction Rebellion, he has been vocal in recent years in pushing companies to improve their climate policy, for instance threatening to sue coal-financing banks and warning his fund will vote against directors whose companies do not improve pollution disclosure.

In October Spanish airports operator Aena bowed to pressure from Hohn’s fund, becoming the first company in the world to give shareholders an annual vote on its climate policy.

Through his charity The Children’s Investment Fund Foundation, which in 2019 approved $386m of charitable payouts, he wrote to seven of the world’s biggest asset managers, urging them to put pressure on companies over climate policy.

Last year TCI was one of a number of funds looking to raise fresh assets from investors after suffering losses during the pandemic. It was also one of the big winners from betting against collapsed German payments group Wirecard, making as much as €193m in a week, according to data group Breakout Point.

Hohn’s fortune was estimated last year at £1.3bn by the Sunday Times Rich List.

laurence.fletcher@ft.com



Source link

Continue Reading

Trending