The week’s news included: EU & US end tariff wars, Alibaba facing $1 billion antitrust fine in China, Elon Musk sued by Tesla shareholder over controversial tweets, Rolls-Royce posts £4bn loss.
Opinion articles of the week:
Opinion articles of the week:
- CNBC – Apple just lost a Disney’s worth in market cap, but two traders are split on whether the stock is a buy.
- FT – Amsterdam: Europe’s surprise early winner as Brexit shakes up the City.
- BBC News – Are staff-free shops the future?
- City A.M – The likelihood of a bubble forming in financial markets.
1. BIDEN’S $1.9TN COVID RELIEF BILL GETS THROUGH CONGRESS
US Congress has passed President Joe Biden’s huge $1.9 trillion Covid relief bill. The package will provide a one-off cash payment of $1,400 to almost every American. Unemployment benefits of $300 per week will be continued until September. State and local governments will receive $350 billion and a further $14 billion will be allocated for vaccine distribution. The US has one of the highest vaccination rates in the world, falling narrowly behind the UK at 31.7 doses administered per 100 residents. Biden was unable to garner support to raise the minimum wage from $7.25 to $15.
President Biden secured a crucial majority in both the Senate and House of Representatives. This is allowing him to get legislation passed without relying on unlikely support from dissenting Republicans. No Republican voted in favour of Biden’s relief package, but the bill passed through the House of Representatives 220-211.
2. US AND EU HALT TARIFF WARS OVER BOEING AIRBUS DISPUTE
The US and the EU have temporarily agreed to end their tariff war over illegal subsidies. The EU accused the US of granting unlawful subsidies to Boeing while the US said the EU gave subsidies to Airbus. In response, both sides slapped tariffs on each other for nearly 20 years. The tariffs had been sanctioned by the World Trade Organisation who found both sides had acted unlawfully. Over the past 2 years, tariffs have been placed on $11 billion worth of goods. The relationship between the EU and US grew strained under President Trump. Now however, both sides have agreed to “a fresh start” and will suspend tariffs for four months. A long term agreement is currently being negotiated.
3. ALIBABA FACING $1BN ANTITRUST FINE
Alibaba is facing a huge fine from the Chinese government over alleged breaches of antitrust law. The Chinese regulators have clamped down severely on Alibaba following founder and former chairman Jack Ma’s criticism of China’s regulatory framework. Following an investigation, Alibaba may be forced to pay around $1 billion, sell off subsidies and end its exclusivity agreements with merchants. Jack Ma has also faced backlash from the government and has made just one public appearance since his speech in October.
The issue of anticompetitive tech giants is a global one. Alibaba is known as the “Amazon of China” and turned over $72 billion last year. Crucially, Alibaba also holds nearly 60% of all ecommerce retail sales in China. Regulators are now scrambling to contain big tech that has grown out of control. It is worth noting however, that such a draconian clampdown would not have happen had Jack Ma not spoken out against the Chinese government. Alibaba has lost 25% of its market value since Jack Ma’s speech and the ramifications look to be worsening.
4. EU TO SUE UK OVER NI
The EU is to launch legal action against the UK over its allegedly unlawful decision to delay post-Brexit customs checks in Northern Ireland. The UK unilaterally decided to postpone the checks until October despite having agreed with the EU to begin checks in April. An extension request was made to Brussels, but approval had not been granted before the decision to postpone was taken. The UK stated that businesses needed more time to prepare. This infuriated EU officials. Ambassadors from the EU’s 27 member states unanimously supported the proposal to launch legal action. Tensions between the UK and EU are likely to continue rise.
5. ELON MUSK SUED OVER TWEETS
A shareholder in Elon Musk’s Tesla is suing the eccentric billionaire for causing losses through his tweets. Musk had already been in hot water with authorities over his tweets in 2018 when he breached securities law. Musk tweeted that there were plans to take Tesla private, before any such plans had been finalised. We explained the full story here.
Following this, Musk agreed to step down as chairman of Tesla, pay a $20m fine and have his tweets vetted by lawyers. Now, however, a shareholder claims his recent tweets have been posted without approval. Bizarrely, in May 2020, Musk tweeted “Tesla stock price is too high imo (in my opinion)”. This, amongst other erratic tweets has allegedly contributed to the recent volatility of Tesla’s share price. Tesla’s share price has plummeted as much as 30% in the past month alone. This lawsuit will pursue Elon Musk for damages caused through his tweets.
6. ROLLS-ROYCE POSTS £4BN LOSS
Engine maker Rolls-Royce has posted a record £4 billion loss for 2020. Rolls-Royce makes a huge percentage of its income from servicing the aircraft-engines it sells. With air travel brought to a standstill throughout the year, income for Rolls-Royce has plummeted. The aerospace giant slashed 7,000 jobs last year and could cut a further 2,000. Fortunately, the company raised £9 billion through rights issues and borrowing, giving it more than enough cash to keep operating.
The outlook is optimistic for 2021 as vaccine rollouts and mass testing could bring life to some normality. Despite this, it foresees another £2 billion in spending just to keep afloat and restructure the business.
7. UBER & LYFT TO SWAP BANNED DRIVER DATA
Ride hailing firms Uber and Lyft have agreed to share data on drivers that have been banned from their respective platforms. This will apply to drivers in the US and is to designed to improve passenger safety. Details of drivers who have been banned for serious offences such as sexual assault, will be shared between the two firms and such drivers will banned from both. Ride hailing firms have been staunchly criticised globally for failing to vet drivers and protect passengers. In the US between 2017 and 2018, Uber received 5981 sexual assault reports. Numerous incidents would have also gone unreported. This latest data sharing agreement has been welcomed. Furthermore, the arrangement will not be limited to Uber and Lyft, other firms will be entitled to join.
8. HSBC TO END COAL LENDING BY 2040
HSBC has announced it will stop financing coal projects by 2040. The bank is attempting to implement its “net zero” strategy by 2050, this includes ensuring all investments a carbon neutral. Under the plans, EU and OECD coal power stations and coal mining firms would be unable to receive financing from HSBC from 2030. This would apply to coal energy firms globally from 2040. Instead, it will provide up to $1 trillion to help its customers decarbonise. By comparison, the bank provided financing worth $15 billion to coal firms over the past 3 years. The plan needs 75% of HSBC shareholders’ approval. Finance will play an important role in tackling climate change, particularly in industries that are heavy carbon polluters. The more support available for businesses to adapt their processes with greener technology, the faster climate objectives will be met.
9. M&S TO SELL RIVAL BRANDS ONLINE
Marks and Spencer is to sell clothes from other brands online, as part of its “transformation programme”. Traditional retailers are recognising the need to adapt to stay afloat. Retailers have been gradually in decline but the recent collapse of Arcadia Group was a significant wakeup call for large retail groups. Furthermore, online retailers Asos and Boohoo have been buying the brands of numerous failed retail giants, signifying that online retail is taking over.
Marks and Spencer saw its own online sales rose by 34% but it saw its first loss in 94 years last year. The retailer will now sell clothes from 11 rival brands including Jack & Jones, Hobbs and Phase Eight. Marks and Spencer’s own brand line will be cut, and other brands will be offered alongside its products. It hopes this will draw in more customers.
10. WARREN BUFFETT HITS $100BN
Warren Buffett has officially joined the exclusive $100 billion club. Considered the most successful investor in the world, the 90-year-old finally joins Elon Musk, Jeff Bezos and Bill Gates in obtaining a net worth over $100bn. Shares in his company, Berkshire Hathaway have soared to new highs of $400,000 per share. The company is an investment firm worth around $600 billion and Buffett owns around a sixth of the business. Berkshire Hathaway owns 90 businesses and has significant stakes in big tech firms. Buffett would have reached the $100bn sooner but he has given over $37 billion worth of Berkshire Hathaway shares in charity since 2006.