The Week UK - 28.03.2020

(Nandana) #1
CITY 45

28 March 2020 THE WEEK

Centralbanksandgovernmentsglobally
deployedanunprecedentedarmoury
ofmeasuresinanattempttodefraythe
economicfall-outfromthepandemic.
Amongothermeasuresincludedinthe
massive$2trnstimulusdealagreedby
theUSCongresswasapledgetohand
out$1,200tomanyAmericansandcash
toboostunemploymentinsurance.But
thecentrepieceofthedealwasa$500bn
loanprogrammeforcompaniesand
states.Thepackageincluded$50bnto
shoreupUSpassengerairlines;theUK’s
Chancellor,RishiSunak,toldUK-based
airlinestofindotherformsoffunding
andsaidtheGovernmentwouldonly
stepinas“alastresort”.
InBritain,theBankofEnglandcut
interestratesforthesecondtimeina
fortnighttoarecordlowof0.1%and
injectedafurther£200mintothe
economythroughbondpurchases.The
measureswereintendedtocomplement
theChancellor’s£350bnrescuepackage
forbusiness.TheFCAimposeda
companyresultsreportingbanforat
leastthenextfortnight,butspeculation
thatitcouldleadtoafullstockmarket
closurecametonothing.
Thepriceofoilcontinuedtofall:Brent
crudehitalowof$26.98/barrel.Gold
bookedthelargestone-daydollar
gainonrecordinadayonTuesday,
beforefallingbackto$1,635.70/ozon
Wednesday.Demandgloballyforthis
traditionalplaceofsafetywasreported
tobesohighthatsovereigncoinsand
bullionbarswerehardtocomeby.

FTSEcompanies:dividendscut
Marketsusedtowhip“divi-cutters”,saidKateBurgessintheFT.Butlikesomuchelse,
thathabithasbeenturnedonitshead.Indeed,whenGo-AheadandKingfisherjoinedthe
30-pluslistedUKcompaniesthathave“decidedtopass,cutordelaypayoutstoinvestors
sincethecoronavirusoutbreak”,theirsharesactuallyrose.Giventheparlousstateofthe
economy,fewinvestors,itseems,“wanttoseecompanycashsplashed”.Manyother
businesses–particularlyhigh-yielders–maynowfollowsuit.EvenShell,whichboasts
ithasn’tcutitsdividendsinceWWII(itcurrentlyyieldsagenerous14%)maybeforced
intoarethink.Forthemoment,management“stillisn’treadytothrowinthetowelon
apaymentthatcost$15bnlastyear”,saidNilsPratleyinTheGuardian–despitea
loomingglobalrecession“andthepriceofabarrelofBrentat$30”.Theprospectofa
cutwillcertainlyterrifymanyincome-seekingpensionfundswhowere“sureofShell”


  • acompanywhich,togetherwithBP,accountsforafifthoftheFTSE 1 00’sdividend
    payout.Forthem,thesuddenlossofincomefromdividendcutsisgoingtobe“yet
    anotherproblem”.Inthemeantime,whatofdirectors’pay?WelldonetoStagecoach,
    whichistohalveboardroomsalariesforthetimebeing.Otherboardroomsannouncing
    joblossesandpaysqueezesshouldtakenote–orriskapublicbacklash.


F1/carmakers/Dyson:ventilating
HatsofftoFormulaOne,saidBBCBusinessNews.Itsmotor-racingteamshavebeen
inthevanguardofcompanies answeringcallsfromgovernmentsto makemoremedical
ventilators.The Britishcarmaker McLaren hasteamedupwithNissan’s F1teamandthe
aerospacecompanyMeggitt.Nowcarmakers globallyarepilingin. Ford isworking with
GEHealthcareand3Mtodesignmodified respiratorsandventilators,“usingfans,batt-
eries”and othercarparts. GeneralMotorsandTeslahavealso pledgedtheirsupport.
Nooneisunderestimatingthechallenge,said TheTimes.But concernsthatdisruption to
ChinesesupplychainsmighthamperUKplanstoproduce30,000 emergencyventilators
haveapparentlybeenovercome.Accordingtoone industrysource,“weareconfident
we candothiswithmaterialsalreadyavailable intheUK”.Another player,Dyson, is
already“scalingup”themanufactureofaventilatorusingcomponents from itsvacuums,
saidRupertEvelyn onITV.com. Prototypesare“likely”tobe tested onpigs’lungs.

Sports Direct: fairplay?
“FightoffthedeadlycoronaviruswithanaluminiumDonnaytennisracket,available
in store atyourlocalSports Direct.PurchaseapairofSondicogoalkeeper glovesfor
additionalprotection...” The spoofMike Ashleyaccounts onTwitterwereworking
overtime this week,aftertheformersquashcoach’sSportsDirectemporiumannounced
thatitsstores would stayopen–indefianceofthegovernmentshutdown–because, the
company argued,theyarevitaltothehealth ofthenat ion,anditsstaff,therefore,qualify
as“key workers”.Cueoutrage.Soonafter,Ashley’sFrasersGroup,which alsoowns
EvansCycles (which saidit wouldstay openforthesamereason),wasforced into a
hasty “clarification” –thestores would,infact, shut.According tothenewsagencyPA,
SportsDirecthasinst eadhiked theonline priceofsportskit“includingskippingropes,
weights andresistancebelts”.There’sno keeping agoodsportsmandown.

McDonald’s: atale of two countries

Hordesof“faithfulfans”queuedforanhouror
moreatMcDonald’srestaurantsanddrivethru
operations“foronelastBigMac”beforethefast-
foodgiantshutupshoponMondaynight,said
TheMirror.Thefeedingfrenzywassobadatone
Cambridgeshirerestaurantthatthecopswere
called.Elsewhere,“policecars”joined“theline-up
forthedrivethru”.McDonald’shadalready
stoppedservingin-housediners,butaficionados
hadhopedtheycouldstillgettakeawaysviaUber
Eats.Nodice.McDonald’shasjoinedotherchains,
includingCosta,SubwayandNando’s,in“total
lockdown”.UKCEOPaulPomroysaidthemove–
whichfollowedtheGovernment’spledgetopay
80%ofemployees’wages–hadbeentaken“with
thewell-beingandsafetyofemployeesinmind”,
aswellas“thebestinterestsofourcustomers”.

Whatacontras ttot hestancetakenintheUS,saidKateTayloron
BusinessInsider.There,executivesatchainssuchasMcDonald’s

andBurgerKing“arepushingargumentsthatitis
crucialtotheAmericanpublicthattheystayopen
duringthecoronavirusoutbreak”.Anddespite
worriesvoicedbysomeworkersabouttherisks
involved,“itlookslikethey’veconvinced”
PresidentTrump–“al ong-timefast-foodfan”.

Thebigissueformanyofthechain’sUSworkers
isthatMcDonald’s,whichearned$5.3bnlastyear,
isn’tguaranteeingsickleaveformostemployees–
eventhoughmanyofthemlivefrompaycheckto
paycheckandneedtoworktostayafloat,saidThe
NewYorkTimes.Accordingtooneshiftmanager
atabranchinKansas,thecompany’srecent
pledgetoprotectits“McFamily”bypayinganyone
quarantinedonlyappliesto“corporate-owned”
restaurants.“Don’tbefooled...95%ofMcDonald’s
storesarefranchisestores,sothatdoesnotbenefitus
whatsoever,”hesaid.“IfIcaughtcoronavirus,wouldyouwant
memakingyournextmeal?”

Trump:a“fast-food fan”

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