The week’s news included; Companies open their purses for BLM, Warner Music IPO, Victoria’s Secret falls into administration in the UK, GAP posts $1 billion loss
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram 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:
- CNBC – QE infinity? The European Central Bank’s emergency stimulus has no real end in sight
- City A.M – COVID-19 and cyber: Critical actions for employees and businesses to take now.
- BBC News – Can Zoom turn popularity into profit?
- CNBC – What history can tell us about how stock markets react to civil unrest.
1. COMPANIES OPEN THEIR PURSES FOR BLM
A number of corporations have spoken out in support of the Black Lives Matters movement and are trying to take steps to help address the issue of racial inequality. The tragic and brutal death of George Floyd has sparked mass protests across the globe on an unprecedented scale. Protests were held across all 50 US states as well as over 20 countries outside of the US. The police officer charged with the murder of George Floyd had his charge increased from third to second degree murder. In addition, the three other officers involved with the death have now been arrested. Floyd’s death has also brought the issue of systematic racism and oppression into the spotlight. Corporations across the globe have taken to social media to condemn racism and express support for racial equality. Some of gone a step further and launched initiatives.
Japan’s Softbank has launched a $100 million fund to invest in companies led by “people of colour”. The fund will help those in communities that face systemic disadvantages to help scale their businesses. Bank of America will invest $1 billion in community programmes over 4 years. Pretty Little Thing will be donating its sales proceed from its new collection to the Black Lives Matter Movement. Ben & Jerry’s ice cream has even launched a campaign to “dismantle white supremacy”. These are highly positive steps and could signal the start of wider social changes. Undoubtedly however, there still remain huge social and systemic barriers that must be overcome to resolve the racial inequalities within our societies.
2. WARNER MUSIC IPO
Warner Music launched its IPO last week and was valued at $12.75 billion. The music giant represents industry heavyweights such as Ed Sheeran, Bruno Mars and Madonna. Warner Music raised $1.93 billion from the floatation. 77 million existing shares were sold at $25 per share. The company delayed its IPO plans due to the coronavirus outbreak as it suffered a loss of $74 million in q2 of 2020 alone.
3. UK REVIEWS HUAWEI
The UK National Cyber Security Centre (NCSC) is launching a review into Huawei and the potential implications for the UK’s 5G network. Earlier this year, the UK government made the decision to allow Huawei to develop non-sensitive elements of the UK’s 5G infrastructure. There are significant concerns that Huawei could be obligated to provide a backdoor for the Chinese government and could be an agent for espionage. Huawei fervently denies these claims and has been working with Western governments to alleviate concerns. The NCSC is now reviewing the decision and considering whether the UK should revoke Huawei’s access to any 5G infrastructure elements. The US has outright banned Huawei from any access to 5G infrastructure development. It has also issued sanctions restricting its ability to purchase US built semiconductors which are crucial parts of Huawei’s smartphones. There is growing political support within the UK to reverse the decision given concerns about China’s influence of private companies and the potential risks to national security.
4. ASTRAZENECA COVID-19 VACCINE
AstraZeneca is beginning production of a coronavirus vaccine and the pharmaceutical giant says it can supply two billion doses of the vaccine. Although trials of the drug are still ongoing, production capacity must be increased and vaccines are produced ahead of time to rapidly supply the vaccines once approved. If the vaccines are not effective however, they will go to waste, so AstraZeneca is taking a significant financial risk producing them. Developers expect the results of the AZD1222 vaccine tests to be available by August. If proven to be effective, by September the first deliveries of the vaccines will be supplied. AstraZeneca has agreed to supply 300 million doses to the USA and 100 million to the UK. One billion doses will be supplied for low and middle-income countries.
5. US EMPLOYMENT FIGURES
The US added 2.5 million jobs in May as lockdown measures ease and the economy picks up. This has broken the record for the most number of jobs gained in a single month. This represents businesses that laid off staff during lockdown but have rehired them as the lockdown restrictions eased. US unemployment hit a staggering 14.7% in April but has now fallen to 13.3%. Many analysts previously expected things to get worse and a potential 20% figure was mooted. Even at 13.3%, this is still the highest rate of unemployment since the Great Depression. There is now however, greater confidence that the US economy will quickly recover once economic activity returns to normality. Stock markets around the world surged on the news with the Dow Jones up 2.5%.
6. VICTORIA’S SECRET FALLS INTO ADMINISTRATION
Victoria’s Secret’s UK arm has fallen into administration. The chain has been struggling amid changing consumer trends and posted a £170 million loss last year. Victoria’s Secret will now seek to find a buyer but nearly 800 jobs remain in jeopardy. The business will continue to operate although all stores are currently closed due to the coronavirus lockdown. 785 of its staff are currently furloughed.
One of Victoria’s Secret main draws was the VS fashion show which for years had drawn millions of viewers globally. In 2018, the show faced a backlash over the lack of diversity and accusations of sexism. Last year, the show was cancelled entirely due to poor ratings. The decline for Victoria’s Secret has been gradual but the company will now seek to reshape itself for the modern era.
7. UK SELLS NEGATIVE YIELD BOND
For the first time in history, the UK government has now sold a negative yield bond. In practice, investors will be paying the government to lend it money. Although the three-year government bonds had a 0.75% “coupon” or rate of return, investors paid more than the face value hence the negative yield. The bonds sold at an average yield of minus 0.003%.
The government is on a borrowing drive in order to fund its huge coronavirus support. It will attempt to raise £180 billion from bond markets over the next three months. In April, the government already raised £45 billion. It is now estimated public sector debt could reach around 95% of GDP.
8. GAP POSTS NEARLY $1 BILLION LOSS
Gap has posted a $932 million loss in the first quarter of 2020 alone. This is largely due to a $250 million write off in the value of goods. In the US, consumer spending is a primary driving force of the economy and spending has plummeted due to the coronavirus restrictions. Although around half of Gap stores have reopened, unemployment is at record highs and spending remains low and net sales plunged 43% in the three months to May. Like many retailers, Gap has refused to pay rent and has been sued by its landlord for $65.9 million over the issue. With so many retailers in similar positions with landlords, the landscape of the retail leasing sector globally is likely to transform over the coming months.
9. UK RENTAL EVICTIONS
The UK government has extended the ban on evicting renters until 23 August. Across England and Wales social and private landlords will not be able to evict tenants who fail to pay due to the coronavirus outbreak. Prior to the extension, the ban introduced under the emergency coronavirus legislation was due to expire in June. There is concerns over the amount of accumulated rent payment arrears . Once the ban is lifted, many vulnerable tenants could still be immediately evicted. As of April, over 2 million people were now claiming unemployment benefits in the UK. The rising jobless numbers could have a significant knock on effect as renters may not be able to make payments. There have now been calls for longer term support for renters in arrears due to the lockdown.
10. BENTLEY JOB CUTS
Bentley has announced it will cut up to 1000 jobs. The luxury car maker has struggled to pull in new customers for a while and is undergoing huge structural reform. The cuts represent nearly 25% of Bentley’s UK workforce. It will now seek to restructure and “redefine” itself. The coronavirus outbreak was a catalyst for the cuts, but the firm asserts this was not the primary factor. After a £250m loss in 2018, the firm entered a turnaround period and posted a £55m operating profit in 2019. With showrooms closed for April and May, the global car industry has taken a hammering so 2020 is likely to see Bentley fall back into the red. In the UK, car registrations were down nearly 90% in May, year on year. Bentley is currently owned by Volkswagen group.