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Latest news
Fed chair Jay Powell warns that further economic stimulus will be needed to prevent long-term economic damage, on top of the $3tn already pledged
It will be “four or five” years before Covid-19 is under control, the WHO’s chief scientist tells the FT’s Global Boardroom digital conference in a bleak assessment of the challenges ahead
Donald Trump’s outbursts against Beijing are putting pressure on the renminbi, investors say, threatening the stability of other emerging markets
As European countries begin to reopen borders and citizens across the continent start dreaming of summer holidays, the European Commission has issued guidelines designed to revive tourism — gradually.
EU officials, backed by 12 states, are encouraging ailing travel companies to make vouchers more palatable — such as making them transferable — so consumers do not exert their rights to demand cash back for cancelled holidays.
Airlines and travel operators have sought ways to defer reimbursements to ease their cash crunch, reflected in the decision by Tui, the world’s largest tour operator, to cut 8,000 jobs. The International Air Transport Association says traffic will not return to pre-crisis levels until 2023.
But governments are discouraging citizens from travelling abroad, and anticipate restrictions on group travel or mass gatherings. “If you travel for crowds, this will be a very difficult summer,” commission vice-president Margrethe Vestager told a virtual press conference.
Some consolation: for those who live in a European capital — and are forced to stay closer to home — city strolling and cycling may become more pleasurable. The City of London has announced plans to ban cars on the busiest roads as the lockdown eases, so they can widen pavements and permit safe social distancing. Paris, Brussels and Milan have all accelerated plans to add new bike lanes for the moment when more people emerge from confinement.
Markets
Collateralised loan obligations, notorious during the subprime mortgage meltdown a decade ago, are again exposed during the pandemic, creating unexpected corporate casualties including medical staffing suppliers financed with junk-rated loans and bonds. “CLOs and the loans underpinning them are ground zero in terms of the vulnerability of this crisis,” said Matthew Mish, a credit analyst at UBS.
The recent rally in global markets faltered today amid virus fears and rising US-China tensions. Investor confidence was shaken by signals that economies might not be able to reopen quickly, and concerns have been growing over a potential second wave of infections in China and South Korea.
Alternative meat products have done well from the crisis, as $930m flowed into companies making plant-based or cell-cultured meat in the first quarter — more investment than in the whole of last year. The crisis has highlighted the vulnerability of the meat industry, while supply chain issues have led to an increase in wholesale prices in the US.
Business
UK manufacturers have pushed back on government plans to impose a 14-day quarantine on travellers arriving from overseas, warning of disrupted production, supply shortages and further job losses. Ian Wright, chief executive of the Food and Drink Federation, said: “It’s clear that if engineers or other manufacturing specialists from abroad are required to self-isolate when they enter the country, they simply won’t come.”
The chief executive of Maersk, the world’s largest shipping container, warned global trade would drop by a record 25 per cent this year and the virus would lead to growing protectionism. Soren Skou said lower oil prices and stable freight rates would help the industry weather the crisis.
Toyota has warned of an 80 per cent collapse in its operating profits over the next 12 months, as it unveiled global vehicle sales of 8.9m, down from 10.5m in its previous fiscal year. But Akio Toyoda, chief executive, said its financial resilience would allow it to maintain investments in areas including self-driving technology and smart cities.
Global economy
Investment into the eurozone has plummeted in recent weeks, raising fears about future growth. Capital expenditure has contracted sharply, while borrowing to invest has dropped. “Investment is crucial, it indicates what future growth is likely to be,” said Yael Selfin, chief UK economist at KPMG.
The global economic outlook has darkened further since the IMF’s forecast last month of a 3 per cent contraction in global output — already the worst blow since the 1930s. Kristalina Georgieva, the fund’s managing director, told the FT: “Without medical solutions on a global scale, for many economies a more adverse development is likely.”
Angel Gurría, secretary-general of the OECD, warned that the extra debt being taken on by heavily indebted governments and companies to tackle the crisis will “come back to haunt us”. Speaking at the FT’s Global Boardroom event, he said: “I am not convinced that we are going to have a V-shaped recovery. I think it will be more like a U.”
Get in touch
How is your workplace dealing with the pandemic? And what do you think business and markets — and our daily lives — will look like after lockdown? Please tell us by emailing [email protected]. We may publish your contribution in an upcoming newsletter. Thanks
The essentials
US citizens have largely complied with lockdowns, indicating a healthier community spirit than might have been expected, writes US political columnist Janan Ganesh. “We should have seen more resistance, more quickly, to a lockdown that has no precedent in peacetime,” he said, yet there is a “show of civic togetherness”.
Researchers are looking to antibodies as weapons in the fight against coronavirus, both in tests for past exposure to infection and for potential treatment. Therapies use blood plasma donated by people who have recovered from the illness.
Renault’s factory north of Paris has gradually reopened over the past two weeks, having spent €800,000 on measures to make the working environment safe, including masks and temperature controls. “The way we have to work now, it’s really difficult,” said employee Patrick Gourdeau.
The FT’s chief economic commentator Martin Wolf explains what the world could look like when the pandemic is over, and one thing is clear, he said: “We are not going to be able to repeat, in the western world, the sort of austerity policies that followed the last crisis.”
Final thought
Normally fashion-conscious Parisians have opted for trusty wardrobe basics that make them feel secure as they ease out of lockdown, writes the FT’s Leila Abboud. Colourful masks have become part of the new reality, but she wonders once the weather turns warmer whether their vanity will win out over fear.
