The week’s news included; Mexico holds up landmark oil production deal, US stocks post largest weekly rise since 1974, VW loses UK dieselgate case, Tech firms ordered to crack down on 5G conspiracies
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- The Fashion Law – Christian Louboutin: Red Soles, High Heels, and a Global Quest for Trademark Rights.
- CNBC – Germany has a low coronavirus mortality rate: Here’s why.
- The Guardian – House sales in the UK will collapse this year as the coronavirus pandemic puts the property market into deep freeze.
- BBC News – UK tech sector begs for help – but does it need it?
1. LANDMARK OIL MEETING
Powerful oil producing nations secured a landmark oil production rate cut after a brutal price war. The price war has brought record low oil prices and has been fuelled by a bitter dispute between bitter price war between Russia and Saudi Arabia. Demand for oil has nosedived 30% due to coronavirus outbreak and oil producers are feeling the pitch. OPEC+ members amongst other oil producing nations held a week long series of meetings where leaders proposed to cut 10 barrels a day. This would reduce global oil supply by 10%. All members agreed initially to the deal apart from Mexico. On Sunday however, a compromised was reached. Members will cut 9.7 million barrels per day. Under the initial deal, Mexico would have needed to cut production by 400,000 barrels but the country agreed to cut just 100,000. In the end, OPEC+ members ceded to Mexico and agreed to reduce Mexico’s required cut to 100,000. With the deal in place, reduced supply of oil should in theory stabilise prices. Whether this will occur amid falling demand remains to be seen.
Bloomberg reported that Mexico has a sovereign oil hedge that protects them against low prices. They quietly bought put options that allow it to sell oil at pre-set price, regardless of market price. This partially why there was very little financial incentive to agree to such a drastic production cut. Mexico is also keen to restore oil production in the country to higher levels. Agreeing to the original OPEC deal may have scuppered these plans.
2. FRANCE ENTERS RECESSION
France has entered recession, posting its worse quarterly performance since World War Two. The coronavirus has pushed the contracting French economy over the edge into technical recession. France’s economy shrank by 6% in the first quarter of 2020 as the whole country enters its fourth week of lockdown. For every two weeks of lock down, the Bank of France predicts a 1.5% contraction. France currently has the fifth highest numbers of coronavirus cases, with over 95,000.
Other nations are still yet to release their GDP figures, but the outlook is bleak. Bloomberg predicts a 100% chance of recession in the US over the next 12 months and this will undoubtedly be mirrored globally. The full economic extent of the coronavirus outbreak remains to be seen.
3. US MARKETS RISE
US stock markets saw their largest weekly gains in 46 years after weeks of turmoil. The S&P 500 soared by 12% while the Dow Jones soared 13%. Gains so large have not been seen since 1974. This was in response to an additional $2.3 trillion made available to government and businesses by the Federal Reserve. These gains come despite a dire economic backdrop. Over 16 million people are now unemployed in the US, with an additional 6.6 million applying for unemployment benefits in the last week alone. This is not representative of the full figure as systems have been unable to process the sheer volume of applications. Some of these workers may be furloughed but there are no figures available as of yet. The government has introduced a multi trillion-dollar support package which provides, enhanced unemployment benefits and a onetime check of up $1200 to all American residents. The economic impact will no doubt be severe and whether these measures will be enough remains to be seen.
4. DEBENHAMS FALLS INTO ADMINISTRATION
Debenhams has fallen into administration putting 20,000 jobs as risk. The high street retailer has been struggling for some time. It has been weighed down by a huge £600 million debt pile and fell into administration last year. It was rescued and entered a CVA, allowing it to close stores and reduce rents. Even with this, it was still was unable to turn its fortunes around. Debenhams had already shut 22 stores this year but coronavirus tipped it over the edge. Its Irish arm has already been placed into liquidation, with the closure of 11 stores. The store will be exploring options to keep the business alive, but the future looks bleak.
5. VOLKSWAGEN DIESELGATE UK HIGH COURT CASE
Volkswagen has lost the first round in a UK high court case over the dieselgate scandal. The court case is part of a group action lawsuit representing 90,000 UK motorists. In the case, the court recognised that “defeat devices” were installed in a number of VW as well as Audi, Seat and Skoda cars. This does not establish any liability for Volkswagen at this stage, but the case is continuing. The scale of this case is unprecedented and could be the largest group action in English history.
The dieselgate scandal broke in 2015 where VW was found to intentionally install cheat devices in cars. These devices produced artificially low emissions under test conditions. On the road, emissions were around 40 times higher than under test conditions. Some 11 million vehicles worldwide were affected. The former executives of Volkswagen are currently facing criminal trials in Germany. Volkswagen has paid a staggering €30 billion in fines and compensation to date. No doubt this figure will soon rise.
6. APPLE & GOOGLE TO LAUNCH COVID TRACING TECH
Apple and Google are teaming up to create new technology to track people who were infected with coronavirus. Phones with the software would emit Bluetooth signals and any phones within 6ft record data about the encounter. Where people test positive for covid-19, they can then opt to send the data to Apple and Google. The tech firms will then trigger alerts on phones who came into contact with the infected persons. In order for the software to work, millions of users would have to sign up to the system. All personal data would be kept confidential even from Apple and Google. The system will also not track GPS location. Apple and Google run 99% of the world’s smartphones through their operating systems. Whether users will trust the technology remains to be seen.
7. WEWORK SUES SOFTBANK
WeWork has sued Softbank over its decision to pull the tender offer on WeWork’s shares. A tender offer is a public offer for shares at a specific price at a certain time subject to sufficient interest. This offer was to sell off shares held by former CEO and founder Adam Neumann. Softbank pulled the offer because WeWork failed to meet a number of conditions. Among the reasons were concerns about the unresolved criminal and civil investigations into WeWork, and failure to obtain antitrust approvals. WeWork felt Softbank was putting it’s own interests above the company. WeWork now request Softbank reinstates the tend offer or pay damages for reneging from the deal. Softbank is WeWork’s largest shareholders and bailed out the company last year after its IPO plans flopped. Tech Crunch explores the drama in more detail.
8. TECH FIRMS TO CLAMP DOWN ON 5G CONSPIRACIES
Social media firms have been ordered by Parliament to crack down on the spread of false 5G conspiracy theories regarding coronavirus. Many people have taken to social media suggesting dangerous 5G radiation causes coronavirus or rather, the symptoms of coronavirus. This has led to people setting over 20 mobile masts on fire. This includes 5G and erroneously, even 4G towers. Experts stress there is no evidence for such claims and it is biologically impossible. The UK culture secretary has now urged social media companies to more aggressively tackle false news surrounding the issue. This however throws up huge moral dilemma surrounding the influence of the state on free speech. Social media firms pride themselves on being platforms for free speech. But at what point does a conspiracy theory become too dangerous to be allowed to circulate. It can become a slippery slope where government can arbitrarily dictate this threshold. On the other hand, theories such as the one in question have led to serious criminal damage. People have damaged critical network infrastructure amid a global crisis, government action was necessary. Whether the social media firms will adhere and crack down on these theories remains to be seen. BBC News explores this issue in more detail.
9. DISNEY PLUS SUBS SOAR
Disney Plus has nearly doubled its subscribers in the past two months to 50 million. The streaming service has no doubt been one of the few benefactors of the coronavirus lockdown. As so many people are stuck at home users have subscribed in droves.
Disney Plus’ initial target was between 60 and 90 million subscribers by September 2024. It looks set to exceed this target within just 12 months. Disney is still well behind Netflix and Amazon who both boast 167 million and 150 million paid subscribers respectively. Netflix and Amazon do not have presence in China but Disney could surpass them both if it can secure access to the market. Disney already have a Disneyland in Shanghai and could potentially build off their relationship with China to enter the market.
10. WIMBLEDON INSURANCE
Unlike many event hosts, Wimbledon tennis organisers had infectious disease cover in its insurance policy, providing a windfall of £114 million. Wimbledon is set to lose roughly £250 million in revenue from the cancellation of the tennis tournament due to coronavirus. The organisers sought to the clause in its policy after the SARS outbreak in 2002 and here it has certainly paid off. Unfortunately, many companies and organisers do not have pandemic clauses included in their insurance policies. Undoubtedly, this will become a common feature in future.