Coronavirus latest: Deluge of corporate reports illustrates deep Covid-19 scars 

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UK traffic levels returning to pre-lockdown levels, AA says

Peter Campbell in London

Traffic on Britain’s roads is crawling back towards pre-lockdown levels, according to findings from the AA.

The breakdown group saw callouts fall to 40 per cent of normal levels in the week following Britain’s lockdown in mid-March.

But it has since climbed back to 90 per cent of expected activity, as people increasingly venture out in their vehicles, according to chief executive Simon Breakwell.

While around half the current callouts are for people unable to start their cars on the driveway, often with flat batteries after weeks of sitting idle, the figures do indicate that traffic on the roads is nevertheless increasing.

“It’s true, far more cars are getting back on the road,” said Mr Breakwell.

The government has warned people only to make essential journeys, such as buying food or medicine or to drive a short distance for exercise, and to avoid visiting family members or going into work unless necessary.

During the lockdown the AA sent all non-patrol staff home and furloughed some employees. It expects annual profits this year to be “slightly below” last year’s levels due to the outbreak.

In the 12 months to January 31, the AA saw trading profit rise 3 per cent £350m, with revenues 2per cent higher at £995m, the business said on Thursday. During the year it stemmed a historic fall in paying members, which rose by 8,000 to 3.2m.

Climate finance envoy Carney urges nations to keep targets in mind

Leslie Hook in London

Mark Carney, the former governor of the Bank of England, says that governments must keep climate policies in mind as they design their coronavirus recovery plans.

“We are all Leninists now – Leninist in the sense of decades happening in weeks,” he said in remarks in an online panel. “There has been an acceleration of some trends in the economy, many of which are positive… some of which will be challenges.”

He clarified later in the discussion: “Just to be clear, my ‘Leninsim’ only extended to the speed of acceleration in some of the changes of the economy.”

Mr Carney continued: “We have large swaths of our population that are either unemployed or having brushes with unemployment, a sense of what it is to be unemployed. And that changes people’s narratives.”

Mr Carney, who departed from the Bank of England in March and is currently an unpaid climate finance envoy for the UN climate talks, added that bailouts of highly polluting industries should take climate goals into consideration.

The larger heavy-emitter industries, most of them are under extreme pressure, and most of them will face some form of restructuring [as we come out of the coronavirus crisis].

As we come of this, certainly, there will be quite a massive reallocation capital required, and the question is, how is that capital going to be channelled.

Climate regulation such as climate risk disclosure should be maintained or extended despite the coronavirus crisis, he added, to give businesses more clarity.

Most US voters trust state governors over Trump on lockdown strategy

More than 70 per cent of likely American voters trust their state’s governor over Donald Trump to decide when to reopen businesses, according to a new poll for the Financial Times that signals mounting dissatisfaction with the president’s handling of the coronavirus crisis.

That is the finding of the latest monthly survey carried out by the Financial Times and the Peter G Peterson Foundation, which you can read more about here.

The poll also found that 48 per cent of likely voters believed Mr Trump’s policies had helped the economy, the lowest level since last November. Only 34 per cent thought they were better off financially than they were when Mr Trump took office — also the lowest level since November.

UK financial regulators forced to push back majority of initiatives

Matthew Vincent in London

Britain’s financial regulators have disclosed that two-thirds of their planned initiatives for the next 12 months are being delayed by the coronavirus pandemic — but their priorities are to hit the original deadlines for introducing post-Brexit and bank capital rules.

The UK regulatory forum, which comprises the Bank of England, Prudential Regulation Authority, Financial Conduct Authority, Payment Systems Regulator and Competition and Markets Authority, on Thursday brought forward the publication of its timetable “grid” as it helps financial groups’ planning amid the Covid-19 crisis.

Of the 80 initiatives listed, 52 have had their timings amended in response to the pandemic. Among the “higher impact” rule changes being delayed are companies’ climate risk disclosures, new requirements to strengthen the operational resilience of IT systems, and consultations on higher standards of consumer protection.

However, half of the 10 higher impact changes listed maintain their original timescales, indicating they remain the regulator’s priorities for 2020. These include “EU exit financial services legislation” and future “supervision of branches of international firms” — both Brexit preparation measures.

In addition, work on updating UK rules to meet Basel III bank capital requirements and transitioning from the tainted Libor lending benchmark will continue as planned.

England and Wales figures show ethnic minorities more at risk

Valentina Romei in London

Covid-19 mortality rates for some ethnic groups are higher than for those of white ethnicity in England and Wales since poorer socio-economic conditions and a higher rate of employment in public-facing occupations expose them more to the virus.

Black men and women are at least four times more likely to die from coronavirus than white peers, age-adjusted data released by the Office for National Statistics covering England and Wales revealed on Thursday.

People of Bangladeshi, Pakistani, Indian and mixed ethnicity also had a statistically significant raised risk of death involving Covid-19 compared with those of white ethnicity, the data showed.

However, when accounting for socio-demographic conditions and self-reported health problems and disability, those of black ethnicity were 1.9 times more likely to die of the disease than white people. In other words, geographic and socio-economic factors account for more than half the difference in risk between those of black and white ethnicity.

“A substantial part of the difference in Covid-19 mortality between ethnic groups is explained by the different circumstances in which members of those groups are known to live, such as areas with socio-economic deprivation,” stated the ONS.

The residual difference could stem from over-representation in public-facing occupations, suggested the ONS. People of Bangladeshi and Pakistani ethnicity are, for example, more likely to work as transport operators than people belonging to any other ethnic group.

Pret plans to reopen 100 more UK outlets

Alice Hancock in London

Pret A Manger will reopen 100 shops from Monday after piloting social distancing measures, such as limiting customer numbers and separating staff working areas with acrylic screens.

The UK sandwich and coffee chain plans to pivot its business model towards selling more groceries, introducing a macaroni cheese ready-meal range next week, as Britons stay at home and prepare most of their food in their own kitchens.

The decision follows a row back from rival cafe chain Greggs, which halted plans to reopen last week after an enthusiastic response on social media prompted fears of a scrum of customers. Other operators have also been wary, with Patisserie Valerie saying it was cautious of “doing a Greggs”.

Pret, which opened 30 of its sites near to National Health Service hospitals on April 30, intends to open an additional 70 in London.

Retailer H&M says trading ‘muted’ in reopened shops

Richard Milne, Nordic and Baltic Correspondent

Sales at Hennes & Mauritz have plunged 57 per cent in the past two months, with trading “muted” in shops that have reopened.

The world’s second-largest fashion retailer said sales from March 1 to May 6 dropped by between 11 per cent in South Korea to 76 per cent in Spain, and 80 per cent in Italy, compared with the same period a year earlier.

The Swedish company reiterated its forecast that the second quarter, which ends at the end of May for H&M, would be loss-making despite a 32 per cent rise in online sales in the past two months compared with a year earlier.

At the peak of the coronavirus pandemic, about 80 per cent of H&M’s stores were closed compared with 60 per cent that have remained shut, it said on Thursday.

The retail group stressed its liquidity was “good” with cash and unused credit facilities of SKr23.8bn ($2.4bn) but said it wanted “financial flexibility” so was looking “to secure additional credit facilities”.

Munich Re financial chief ‘puzzled’ by stock market rebound

Olaf Storbeck in Frankfurt

Munich Re’s chief financial officer Christoph Jurecka said that he was “puzzled” by the sharp rise in global share prices since mid-March, warning that the recent rebound on the equities market appeared to be “decoupled” from fundamental developments in the corporate sector and the wider economy.

Mr Jurecka made the remarks on an earnings call with journalists on Thursday, stressing that he was giving his “personal opinion” rather than an official view of the German reinsurance provider.

Since mid-March, the Dow Jones industrial average has risen more than 27 per cent, recovering roughly half of the losses incurred since February.

“I am personally puzzled by the strength of the recovery,” said the chief finance officer of the world’s second-largest reinsurer, adding that the rebound to a large degree seemed driven by expansive central bank policy.

“The question is: how long will this last?”, said Mr Jurecka, adding that “the developments on the equity markets are surprising” relative to the poor performance of the corporate sector and the looming macroeconomic recession.

He expects the recovery to reverse if it becomes clear that there is a second wave of coronavirus infections, if not before then.

Fears rise over South Korean spread after partygoer tests positive

Song Jung-a in Seoul

A South Korean nightclubber’s infection with coronavirus has renewed concern about further possible community spread just as the government eased its social distancing campaign.

The 29-year-old resident of Yongin, a city outside Seoul, is one of four new cases reported in South Korea on Thursday. The other three infections were imported. The patient, with no overseas travel record, visited bars and clubs in Itaewon, a party district in central Seoul, before testing positive for the virus, marking the first local infection in four days.

Health authorities are conducting an epidemiological probe to trace those who have come into contact with the man. The Korea Centers For Disease Control and Prevention said it had identified 57 people with whom he had come into contact and expects the number to increase. One of the 57, who lives in Anyang near Seoul, also tested positive after visiting Itaewon with the Yongin resident.

South Korea has eased social distancing rules as of Wednesday, lifting tough restrictions on entertainment facilities. But health authorities remain on alert over cases with unknown sources of infection, which accounted for about 6.5 per cent of new cases for the past two weeks.

Nigeria to extend flight ban by one month

Neil Munshi, west Africa correspondent

Nigeria will extend its ban on all flights for another four weeks from Thursday, as Africa’s most populous country takes further steps to contain the coronavirus pandemic.

The government is easing a five-week lockdown in Nigeria’s commercial centre of Lagos, its capital Abuja and Ogun state. However, new daily case counts are rising by hundreds while local media have reported on scores of mysterious deaths in three northern states.

Nigeria has reported around 3,100 confirmed cases of Covid-19 since it recorded sub-Saharan Africa’s first case. However, testing remains limited and the country has only conducted around 20,000 tests for its 200m people.

More than 450,000 French jobs destroyed in first quarter

Victor Mallet in Paris

French private sector employment fell 2.3 per cent in the first quarter, with “net destruction of 453,800 jobs” as the coronavirus crisis strikes deep.

The job losses resulting from the coronavirus crisis and lockdown of the eurozone’s second-largest economy have left private sector employment at its lowest level since the third quarter of 2017, just after President Emmanuel Macron was elected. The biggest decline was in temporary employment, which was down by 291,800 jobs or 37 per cent, the statistics institute Insee said on Thursday.

Most jobs threatened by the crisis have been protected by the government’s “temporary unemployment” scheme, under which the state subsidises companies to pay the salaries of employees unable to work.

More than 12m out of France’s 20m private sector workforce are benefiting from the scheme.

French economic activity dropped by about a third as a result of the crisis, Insee said in a separate report.

Eurozone construction sinks as lockdowns weigh on economy

Valentina Romei in London

Another set of historically weak data has highlighted the impact of the pandemic on the eurozone economy.

The virus has resulted in the largest fall on record in eurozone construction activity, and in industrial production in France and Germany.

The IHS eurozone purchasing managers’ index for construction crashed to 15.1 in April from 33.5 in March, the lowest reading since the record began in 2000.

April’s PMI construction index for France fell to 3.8 and that for Italy to 4.8, for both by far the worst on record. In Germany, the drop was less severe, reflecting less stringent restrictions than in France and Italy.

Germany and France’s industrial production also contracted at the fastest pace on record in March, according to official statistics also released on Thursday.

The figures came as France’s national statistics office revealed that employment in the eurozone second-largest economy dropped by 2.3 per cent in the first quarter, marking a return to employment levels seen at the beginning of 2017.

The number of temporary jobs, which accounts for a significant part of French employment, shrank by 37 per cent. At the peak of the financial crisis, temporary employment fell by 13.9 per cent.

Norges Bank cuts rates to zero as economy faces double hit

Richard Milne in Oslo

Norway’s central bank cut interest rates to a record low of zero but said it was unlikely to go negative as the rich Scandinavian country faces up to the twin shocks of coronavirus and a dramatic oil price collapse.

Norges Bank said on Thursday that the 0.25 percentage point cut would not prevent Covid-19 from having “a substantial impact on the Norwegian economy, but can help dampen the downturn”, including by stopping high unemployment becoming entrenched.

“In the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely remain at today’s level for some time ahead. We do not envisage making further policy rate cuts,” said governor Oystein Olsen.

Norway has cut its interest rate by 1.5 percentage points in the past two months amid the country’s biggest economic slowdown since at least the second world war. Home to the world’s largest sovereign wealth fund with about $1tn in assets, Norway has more room than most to stimulate its economy but the pressure on its oil industry – it is the largest crude producer in western Europe – mean that many economists expect it to face a more straitened future after the twin crises.

Norges Bank forecast that mainland growth, which strips out the oil industry, would decline by 5.2 per cent this year while unemployment is expected to rise to 6.3 per cent, well below the current 14.6 per cent rate.

European corporate news round-up


BT will not pay a dividend for the first time since the start of the millennium and warned shareholders to brace for lower payouts in the future as the UK telecoms group focuses on improving its broadband network and safeguarding its credit rating.

British Airways parent IAG warned it will have to take further action to survive the blow inflicted by the coronavirus pandemic as it predicted it would take three years before passenger demand returns to normal.

InterContinental Hotels Group, the owner of the Crowne Plaza and Holiday Inn brands, said that it could currently last 18 months with empty hotels as it expects revenue per average room to be 80 per cent lower than last year in April.

Rolls-Royce said that it expects to cut £1bn of costs this year, £250m more than previously estimated, as the company slashed its delivery target by 40 per cent for the year and warned of a smaller commercial aerospace market going forward.

Ticket booking platform Trainline said that UK and European passenger volumes are currently down as much as 95 per cent, as it reported that ticket sales rose 17 per cent to £3.7 billion in the financial year to the end of February.

Morgan Sindall said that 80 per cent of its construction sites are operational, albeit at lower levels of productivity, in a sign of a return to economic activity in the UK. 1,700 employees are currently furloughed, it added.

Continental Europe

The world’s largest brewer Anheuser-Busch InBev sold almost a third less beer in April than a year earlier as the pandemic closed bars and restaurants across large parts of the world.

Puma warned investors on Thursday that the financial hit from the coronavirus pandemic will become worse in the second quarter after a 50 per cent year-on-year plunge in operating profit between January and March.

Air France-KLM fell to an €815m operating loss in the first quarter, despite only the final two weeks of the reporting period being affected by lockdowns in Europe.

Reinsurance provider Munich Re suffered €800m in losses related to Covid-19, largely due to insurance for event cancellations, reducing profits for the first quarter to €221m, a third of that achieved a year earlier.

Equinor reported that adjusted earnings before tax halved to $2.05bn in the first quarter, as the Norwegian oil major suspended guidance for the year due to government-imposed production curtailments, part of wider global efforts to reduce supply to support crude prices.

Euronav said that rates for its supertankers were $95,000 per day in the second quarter to date due to continuing demand for floating storage of oil, as profits at the Belgian tanker group surged to $225m, up from $20m a year ago.

Russian business activity sinks

Henry Foy in Moscow

Russia reported a new record daily increase in coronavirus cases on Thursday as the country leapfrogged France and Germany to become the world’s fifth most affected.

The continued surge in cases comes as data showed business activity in the country’s service sector experienced its sharpest contraction on record in April, as a six-week long lockdown paralysed the country’s economy.

The purchasing managers’ index for services fell to 12.2 in April from 37.1 in March, its lowest reading since records began in October 2001, according to survey provider IHS-Markit. The index for manufacturing also plunged below 20. Any score below 50 represents a contraction.

That data came as Russia’s government said it had recorded another 11,231 cases of Covid-19, a new daily record that takes the country’s total cases above 177,000. More than 1,600 people have died from the virus in Russia.

Despite that continued rise in infections, president Vladimir Putin on Wednesday agreed to allow construction firms and industrial companies to restart work in Moscow from next week, in the first move to ease the lockdown.

Anglo American starts on thermal coal demerger

Neil Hume in London

Anglo American has started work on a possible demerger of its thermal coal operations in South Africa, where the mining industry is emerging from a coronavirus lockdown.

The London-listed miner said it believed the long-term prospects of the business, which serves the domestic and export markets, might be better served under “different ownership”.

In response to its questions submitted ahead of its annual general meeting this week, the company said:

We are therefore working towards a possible demerger of our thermal coal operations in South Africa as our likely preferred exit option, expected in the next two to three years, with a primary listing on the Johannesburg Stock Exchange for the demerged business.

Production from its coal mines in the country is expected to increase through May and June as travel and other Covid-related restrictions ease.

Anglo, which has positioned itself as an environmental and social champion, has come under pressure from large shareholders to exit coal and set out formal plans to reduce carbon emissions.

World’s biggest steelmaker ArcelorMittal suspends dividend

Michael Pooler in London

The world’s biggest steelmaker outside China, ArcelorMittal, has suspended its dividend after swinging into the red in the first quarter compared with a year earlier as Covid-19 hit construction and manufacturing activity.

The Luxembourg-based group predicted a 30 per cent slump in shipments during the second quarter after posting a net loss of $1.12bn for the three months ended March 31.

Like other producers of the metal, ArcelorMittal has temporarily idled furnaces in response to falling demand from carmakers and building sites, but said it was seeing signs of customers restarting production.

Chief financial officer Aditya Mittal said lower capital expenditure would help reduce cash needs by $1bn in 2020. “We entered this period from a position of significant strength. Our net debt [at $9.5bn] is its lowest ever and our liquidity is strong,” he said.

ArcelorMittal also withdrew its closely-watched forecasts for global steel demand this year because of the uncertainty caused by the pandemic.

Rolls-Royce lowers delivery target to lowest in almost 10 years

Peggy Hollinger in London

Rolls-Royce has slashed its delivery target by more than 40 per cent for this year and found an extra £250m in cash savings as it braces for a protracted downturn in demand for aero-engines.

The company, which is preparing to cut 8,000 jobs due to the aviation crisis sparked by Covid-19, on Thursday said it expected to deliver 250 passenger jet turbines in 2020 against expectations of 450. That would be the lowest level of deliveries in almost a decade. Rolls-Royce earns profits not on the sale of engines but on the installed base, with carriers agreeing long-term contracts to pay for the time the turbines are flying.

Rolls-Royce said engine flying hours were about 40 per cent lower than expectations in the first four months of the year as airlines around the world grounded their fleets. In April alone they fell by 90 per cent.

Warren East, chief executive, said the company was taking measures to reduce the cost base. Referring to the planned job cuts, first reported by the Financial Times, Mr East said the group had made better than expected progress on conserving cash since announcing a £750m cash flow benefit in 2020. The group now expects to deliver some £1bn in cash savings this year.

This would add to other measures to bolster liquidity, including the cancellation of the dividend resulting in cash flow savings of £137m, and an additional revolving credit facility of £1.5bn.

“The severity of the disruption caused by Covid-19 is expected to lead to a smaller commercial aerospace market which may take several years to recover,” the group said. “ As a result, we are actively pursuing changes to our business, particularly in civil aerospace, to better align to medium-term market conditions.”

The group also said it expected a ” material deterioration” in its power systems division.

Shares fell almost five per cent in mid-morning trading to 279.7p, down close to 70 per cent over the last year.

The group will webcast its annual meeting on Wednesday.

BT shares slide after dividend suspended

Shares in BT dropped almost 10 per cent at the market open in London, after the telecoms group said that it would not pay a dividend for the first time since the beginning of the millennium.

Shares in the company fell 9.6 per cent to 103.21p apiece. The telecoms group said that it will suspend its final dividend for 2019/20 and all payouts in the upcoming financial year to help it invest in 5G telecoms and get through the Covid-19 crisis. Analysts had expected the dividend to only be reduced by 30 per cent.

The move came as Liberty Global and Telefónica struck a landmark deal to combine their British operations O2 and Virgin Media in a £31.4bn agreement to become the UK’s second-largest broadband provider.

The dividend cuts are part of a broader five-year plan to cut costs by £2bn a year and modernise the company with new technologies.

Shares later trimmed some of the losses to trade at 106.15p per share, down 7 per cent.

Economists expect further QE from BoE in coming months

Economists expect the Bank of England to boost its quantitative easing programme over the coming months, after the bank’s rate setters held off making any new changes this month.

James Smith, an economist at ING, said he expects the UK’s economic recovery to be slower than the bank’s central forecast, and “that means quantitative easing is likely to be boosted over coming months”.

 Of course there is plenty of uncertainty about what will happen later this year and beyond, but we suspect the true path of the recovery will be more gradual. We don’t expect the economy to recover its lost ground until at least 2022, and perhaps later.

Seema Shah, chief strategist at Principal Global Investors, said “the onus is surely for additional QE to be announced in June” after two members of the monetary policy committee voted for further easing at this month’s meeting.

The Bank’s report also would have made some interesting reading for the UK government, showing that each additional two weeks of lockdown costs the UK economy around £28bn and another 0.75% rise in unemployment. The economic price of lockdown is clearly meaningful.

QE could be expanded at the bank’s next meeting in June, of not the following one in August, according to Paul Dales, chief UK economist at Capital Economics.

With two of the seven members voting to expand QE by £100bn at this meeting and the other five suggesting they didn’t because they preferred to wait for more information, it feels like only a matter of time before the MPC expands QE. 

Puma warns worse to come as profits halve in first quarter

Olaf Storbeck in Frankfurt

Puma warned investors on Thursday that the financial hit from the coronavirus pandemic will become worse in the second quarter after a 50 per cent year-on-year plunge in operating profit between January and March.

“2020 is and will continue to be a difficult year, where the goal for Puma is to survive, recover and then emerge stronger with growth again,” the Herzogenaurach-based group said on Thursday, pointing out that it is currently selling only about half as many shoes and apparel as in normal times.

Over the first quarter, where the economic fallout from the pandemic for Puma was largely limited to its Asian business, operating profit stood at €70m, down from €142.5m a year earlier as costs increased and inventories shot up.

Earlier this month, the company secured a new, government-backed revolving credit line of €900m. Puma said that it is currently undergoing a recovery in China and South Korea and reopening stores in some European countries. In the Americas, however, its distribution “is still almost fully shut down”.

The group said that the situation was too unpredictable to give a reliable financial outlook for the full year.

Air France-KLM posts Q1 loss as first two weeks hit by corona effect

David Keohane in Paris

Air France-KLM fell to an €815m operating loss in a first quarter that was hit by two weeks of the coronavirus lockdown, which has since paralysed major economics and travel.

The airline, which was formed by the merger of Air France and KLM of the Netherlands in 2004, expects to burn through €400m in cash a month in the second quarter despite cost-cutting measures such as the extensive use of government partial unemployment schemes that is saving it €350m a month.

In the first quarter, revenues fell by 15.5 per cent over the same period last year to €5bn while the group’s net loss increased from €324m to €1.8bn, driven in part by a fuel hedging loss of €455m.

Air France-KLM predicted “significantly negative” earnings over the full year and “a significantly higher current operating income loss in the second quarter than in the first quarter 2020.”

It said it expects capacity to be down 95 per cent in the second quarter and 80 per cent in the third, compared to last year, and that it didn’t see demand recovering “to pre-crisis levels before several years”.

Air France-KLM confirmed last month that it had won a €7bn loan package from the French government while the Netherlands has pledged between €2bn and €4bn.

European stocks set to eke out gains

European stocks point to a reversal of yesterday’s losses, with futures for the Europe-wide Stoxx 600 set for gains of 0.3 per cent.

FTSE 100 futures point to mild 0.2 per cent riser after the Bank of England announced its decision to hold interest rates, while the German Dax is pitched to open up 0.15 per cent higher.

Stocks on Wall Street are set for much stronger gains later in the day, with futures for the S&P 500 pointing to a 0.9 per cent rise.

The positive sentiment in Europe and the US follows a muted performance in Asia, following the release of a mixed bag of Chinese economic data.

German industry suffers record 9.2% fall in output

Martin Arnold in Frankfurt

German industrial production fell by a record monthly amount of 9.2 per cent in March, as the pandemic forced companies to shut their doors and workers to stay home, according to new data published on Thursday.

The sharp fall in output underlines how the coronavirus crisis has brought added misery for Germany’s manufacturing sector, which has long been the export-focused powerhouse of Europe’s largest economy, but for the past two years has suffered from declining orders.

The Federal Statistics Agency said the monthly drop in German manufacturing production was the biggest since it started its survey in 1991, while construction was a rare bright spot with its production increasing by 1.8 per cent in March.

The automotive industry was one of the hardest hit sectors, with its output falling 31.1 per cent, while production of recorded media, pharmaceutical products and clothing all fell between 11.5 and 12.5 per cent.

Economists expect an even steeper drop in production for April as full lockdowns were only introduced for many European countries in mid-March. A sign of tougher times ahead came with this week’s news that orders for German industry fell by a record 15.6 per cent in March.

The German government this week outlined a timetable for a gradual lifting of the coronavirus lockdown on the country and many factories are expected to ramp up production this month and next month.

But Andrew Kenningham, economist at Capital Economics, said: “No matter how quickly Germany gets back to normal it will be constrained by the recovery in the rest of Europe given its dependence on external demand.”

India factory gas leak kills at least five as industries restart

Benjamin Parkin in New Delhi and Jung-a Song in Seoul

A gas leak at a factory in southern India, since brought under control, has killed more than five people and made hundreds unwell as industries reopen after the weeks-long coronavirus lockdown.

The suspected leak of deadly styrene gas took place at a factory in Visakhapatnam operated by South Korea’s LG Chemical. Hundreds have been hospitalised and injured, according to officials and local media.

“Hundreds of people have inhaled it and either fell unconscious or having breathing issues,” Srijana Gummalla, the municipal commissioner, wrote on Twitter.

LG chem said the gas leak at its Indian plant has been brought under control and it is taking measures to protect villagers and workers.

“We are currently assessing the extent of the damage on the town’s residents and are taking all necessary measures to protect residents and employees in cooperation with related agencies,” the company said in a statement, adding that it was still checking the cause of the accident and the extent of damage.

The incident comes days after many Indian industries were given the green light to start operating again after the government ordered India into a lockdown in late March to stem the spread of coronavirus.

A gas leak in 1984 in the Indian city of Bhopal killed thousands, still making it one of the worst industrial disasters in the world.

Germany reports slight rise in new cases

Guy Chazan in Berlin

Germany reported 1,284 new coronavirus cases on Monday, an increase on the day before, but saw a slight decline in the number of recorded deaths from the disease.

According to official data from the Robert Koch Institute in Berlin, the number of people who died of Covid-19 over the past 24 hours rose by 123 to 7,119. The total number of detected infections increased to 166,091, though around 139,900 of them have already made a full recovery.

Holiday Inn owner says it could last 18 months with rooms empty

Alice Hancock in London

InterContinental Hotels Group, the owner of the Crowne Plaza and Holiday Inn brands, said that it could currently last 18 months with no one in its hotels as the industry faces its “most significant challenge” ever.

Keith Barr, IHG’s chief executive, said that occupancy levels had dropped to “historic lows” across the group as government-enforced closures, combined with the shutdown in global travel, hit the hotel industry.

“Covid-19 represents the most significant challenge both IHG and our industry have ever faced,” he said.

Despite only around 15 per cent of IHG’s estate being closed at the end of April, occupancy levels were around 20 to 25 per cent with revenue per available room – the industry’s favoured metric – down 55 per cent in March compared to the same month in 2019. It expects revpar to drop by 80 per cent in April.

In China, only 10 of IHG’s hotels were closed compared to 178 at the height of the outbreak there. Revpar had improved from a like-for-like decline of 89 per cent in February to around 75 per cent in April.

InterContinental, which operates around 5,900 hotels, said last month that it had secured a $740m loan through the Bank of England’s coronavirus support scheme and that it had around $2bn liquidity to see it through the crisis. On Thursday, it said that it had also extended the term on a $1.28bn credit facility until September 2023. The group has waived its debt covenant tests until 2021.

Sterling higher following BoE

The pound rose slightly after the Bank of England held interest rates and unveiled its forecasts for the UK economy.

Sterling was recently 0.2 per cent higher against the US dollar at $1.236.

The central bank said economic forecasting  is “unusually uncertain at present”, but that in a “plausible scenario” the UK economy could shrink 14 per cent this year. It added the speed of the recovery “will also be affected by how households and businesses respond once measures are lifted.”

Jon Hudson, UK equities investment manager at Premier Miton, said:

With two members voting for an increase in asset purchases and inflation likely to fall further below the Bank’s 2% target in the coming months, the key takeaway appears to be to expect more stimulus in the coming months.

BA parent IAG warns of further cuts as recovery set to take 3 years

British Airways parent IAG warned it will have to take further action to survive the blow inflicted by the coronavirus pandemic as it predicted it would take three years before passenger demand returns to normal.

The airline group, which last week announced BA would be cutting 12,000 jobs, said that the slow return to normality meant further restructuring across the group would be “essential”.

“We do not expect passenger demand to recover to the level of 2019 before 2023 at the earliest,” said IAG chief executive Willie Walsh. “This means group-wide restructuring is essential in order to get through the crisis and preserve an adequate level of liquidity. We intend to come out of the crisis as a stronger group.”

Lockdowns and travel curbs imposed by governments across the world have caused a collapse in air traffic and left the aviation industry reeling from the worst crisis in its history.

IAG – which owns Ireland’s Aer Lingus and Spain’s Iberia as well as the UK flag carrier – hopes to return its planes to the skies from July and expects passenger capacity to be down by around half for the year as a whole. But it said these plans remained “highly uncertain and subject to the easing of lockdowns and travel restrictions”.

The group’s comments came as it reported results for the first three months of the year, with an operating loss of 535m, down from a profit of €135m a year ago, in line with expectations. Its pre-tax loss was €557m, down from a profit of €86m. Revenue slid 13 per cent to €4.6bn.

Given restrictions to curb the spread of the virus only began in late February the worst of the crisis was not reflected in the first quarter results. It expects the second quarter to be “significantly worse”.

BT suspends dividend for this year and next

Patricia Nilsson and Nic Fildes in London

BT will not pay a dividend for the first time since the beginning of the millennium as the telecoms group said it needed to ensure it could continue investment in the UK’s full fibre network.

The group will axe its final dividend for 2019/20 and the upcoming year to create capacity for investment and to manage through the Covid-19 crisis. Analysts had only factored in a 30 per cent cut. BT last passed on paying an interim dividend in 2001/2002.

The company expects to resume paying dividends in 2021/22, rebased to 7.7p per share.

“BT plays a key role in sustaining critical national infrastructure – as magnified by the Covid-19 crisis – and many stakeholders trust and rely on the connectivity we provide,” said Jan du Plessis, BT’s chairman.

He said the company was “ready” to build out its full fibre network to 20m premises by the end of this year, but that cutting the dividend was needed to “navigating the unprecedented uncertainties caused by Covid-19 without compromising our credit rating”.

BoE: UK economy could contract 30% in first half

Chris Giles, Economics Editor

The Bank of England decided not to pump additional money into the UK economy, preferring a wait-and-see approach as economic output plunges in the worst recession in a century.

In its monetary policy report, the UK’s central bank presented a less certain than normal forecast with the economy contracting 30 per cent in the first half before a rapid recovery.

Andrew Bailey, BoE governor, said that because he expected the government’s support schemes would be successful, “there is only limited scarring to the economy”.

Not all monetary policy committee members supported the majority decision. Two of the nine members, Jonathan Haskell and Michael Saunders, voted to increase quantitative easing by another £100bn.

The BoE undertook an exercise to test whether the financial system could cope with the expected once-in-a-century recession and concluded that it could.

It assessed that banks would lose less money than in its latest stress test and “the core banking system has capital buffers more than sufficient to absorb losses”.

Reinsurer Munich Re’s Q1 hit by scrapped events such as Euro 2020

Olaf Storbeck in Frankfurt

Munich Re’s profit plunged 65 per cent year-on-year in the first quarter as the world’s second-largest reinsurance group was hit by €800m in coronavirus-related losses, driven by a spike in payouts for event cancellation insurance.

Over the past three months, events around the world including the 2020 Olympic Games, the Uefa Euro 2020 as well as trade fairs, concerts and other events have been cancelled as governments imposed far-reaching social distancing measures designed to slow down the spreading of coronavirus.

Between January and March, the group generated €221m in quarterly profit, compared to €633m a year earlier.

In mid-February, the group’s head of reinsurance Torsten Jeworrek told journalists that the group’s exposure to event cancellation insurance stood at a “medium triple-digit million” euro amount.

Munich Re in late March ditched its profit target of €2.8bn for 2020 and suspended its share-buyback programme, pointing to the uncertainty created by the pandemic. “Munich Re will not specify a new profit target for 2020 at this time,” the group said on Thursday.

The group this week paid out its dividend of €9.80 a share, a 6 per cent increase compared to the previous year.


BoE keeps interest rates on hold

The Bank of England has kept its interest rate at 0.1 per cent, and kept its asset purchasing programme unchanged at £645bn.

The nine-person monetary policy committee voted unanimously to keep rates unchanged, although two voted to increase the target for the stock of asset purchases by an additional £100bn at this meeting.

On the state of the economy, the bank said:

The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world. Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.

Bank of England: What to watch

The Bank of England is due to announce its interest rate decision and release forecasts for the UK economy in the next few minutes.

The FT’s economics reporter Delphine Strauss has said there are four key issues to watch for:

1. Will the BoE announce any new stimulus?

2. How bad does the MPC think the impact of lockdown has been?

3. What kind of recovery does the BoE expect?

4. Does the BoE think the financial sector is coping?

Read more on what to watch here.

AB InBev global beer sales drop by a third in April

Judith Evans in London

The world’s largest brewer Anheuser-Busch InBev sold almost a third less beer in April than a year earlier as the coronavirus pandemic closed bars and restaurants across large parts of the world.

The brewer of Budweiser, Stella Artois and Corona said on Thursday that global volumes were down by 32 per cent in April following a first quarter in which they declined 9.3 per cent as the pandemic began to take hold.

The group said revenues dropped 5.8 per cent in the first quarter — slightly worse than analysts had expected — to $11bn, taking the company to a normalised loss of $845m, down from a $2.4bn profit a year earlier.

“Social distancing and lockdown measures were put in place in most of our markets starting in mid-March 2020. This had a disproportionately negative effect on the on-premise channel [bars and restaurants], which represented approximately one-third of our global volume last year,” the company said.

However, it said “early signs of recovery” were emerging in markets hit early by coronavirus, such as China and South Korea, with “steady reopenings of many of our customers” from March. Volumes in China were down 17 per cent year on year in April, compared with a 46.5 per cent drop in the first quarter.

The group has put in place cost-cutting measures including renegotiating sponsorships and a salary cut of 20 per cent for senior executives. Last month it said it would cut its final dividend by half, to €0.50 a share.

ABI’s shares have shed almost half their value since the start of the year to trade at €38.96 by the end of Wednesday, weighed down by concerns over its debt levels: net debt was $95.5 billion as of December 31.

India calls on private doctors as Covid-19 cases expected to rise

Amy Kazmin in New Delhi

India’s financial capital, Mumbai, is gearing up for a wave of up to 75,000 coronavirus cases in the coming weeks, as the spread of the virus shows no sign of slowing down even after the country’s six-week national lockdown.

The densely populated port city now has 10,000 confirmed cases. It is the Indian urban centre hardest hit by the virus, which has spread rapidly through crowded slums and tenements where millions live cheek by jowl, sharing amenities like toilets, showers, kitchens and water pipes — making social distancing impossible.

To cope with an expected surge in the coming weeks, the Maharashtra state government has ordered all the city’s 25,000 private doctors to immediately report for a 15 days of duty at one of the city’s Covid-19 hospitals, where health care professionals are struggling to cope with the high patient load.

The government has said that doctors who fail to comply will face the loss of their medical licences, although doctors over the age of 55, or with health issues that make them more susceptible to serious illness from the coronavirus, will be exempted.

Meanwhile, the Brihanmumbai Municipal Corporation is rushing to set up temporary quarantine centres — known as Covid Care Centres — in municipal schools and large open-air public spaces.

India’s bustling cities account for most of the country’s coronavirus cases. Mumbai accounts for about 20 per cent of the national caseload, while the capital, New Delhi, has about 11 per cent of total cases. The business hub of Ahmedabad comes third, with about 9 per cent of the national caseload.

India’s total caseload has risen to 53,000 of whom 1,785 have died and 15,433 have recovered.

Japan to approve remdesivir to treat Covid-19

Kana Inagaki in Tokyo

Japan plans to approve the use of Gilead Sciences’ potential coronavirus drug remdesivir on Thursday, according to Prime minister Shinzo Abe.

The decision follows last week’s decision by the US Food and Drug Administration to approve Gilead’s antiviral for emergency use after positive results from a US-led trial were announced.

Mr Abe had indicated earlier in the week that the government would use a special fast track for the approval process and specified the date for approval during an online programme late on Wednesday.

The unusual decision comes even as the positive data from the remdesivir study run by the US government were accompanied by several caveats that it was not a “knockout” trial.

On Monday, Mr Abe said he would also aim to have Fujifilm Holdings’ anti-flu drug Avigan approved for use as Covid-19 treatment by the end of this month.

Philippines economy contracts for first time in 22 years

John Reed in Bangkok

The Philippine economy has contracted for the first time in 22 years as coronavirus-related lockdowns hit the country’s manufacturing, transport, and hospitality sectors.

The Philippine Statistics Authority reported a 0.2 per cent decline in gross domestic product for January to March compared with the same period last year, the first negative growth reported since the fourth quarter of 1998, during the Asian financial crisis.

The government agency said that farming and fishing contracted by 0.4 per cent in the quarter, and industry by 3 per cent, but services posted growth of 1..4 per cent during the period.

Since March, President Rodrigo Duterte has assumed emergency powers and imposed strict lockdowns on Luzon island and in other parts of the archipelago nation to combat the spread of Covid-19.

The country has confirmed more than 10,000 cases of the disease and 658 deaths, the highest number of infections in south-east Asia after Singapore and Indonesia.

Before the pandemic, its consumption and service-driven economy had been growing at an average annual rate of 6 per cent.

US-China spat over origins of coronavirus shows no signs of abating

Christian Shepherd in Beijing

The US-China spat over the origins of coronavirus shows no signs of abating even though US secretary of state Mike Pompeo appeared late on Wednesday to ease off his claim of having evidence that the virus leaked from a Wuhan lab.

The shift in tone was seized on as a victory by some nationalists in China. “[This move] clearly shows that the Trump government’s propaganda campaign to frame the Wuhan lab has hit a setback,” Hu Xijin, editor of popular nationalist tabloid the Global Times, wrote on Chinese social media.

China’s foreign ministry on Wednesday challenged Mr Pompeo to provide evidence for his claims that Covid-19 leaked from a lab in Wuhan, China.

Responding to Mr Pompeo’s comment that the US had “enormous evidence” that the coronavirus pandemic originated from a virology research institute in Wuhan, a ministry spokesperson said that “he simply doesn’t have it.”

“This is a very serious scientific question that must be investigated by scientists and medical experts on the basis of facts and science,” the ministry said.
The Wuhan lab has become a focal point of a war of words between Beijing and Washington over who is ultimately to blame for the global pandemic.

President Donald Trump insists he has seen evidence that coronavirus originated at the institution, while China has accused US officials, Mr Pompeo in particular, of trying to shirk responsibility for their sluggish response to the outbreak.

Mitsubishi Heavy Industries to complete Bombardier regional jet acquisition

Robin Harding in Tokyo

Mitsubishi Heavy Industries will complete the acquisition of Bombardier’s regional jet division on 1st June but take an immediate write-down of ¥50bn-¥70bn ($470m-$660m) as coronavirus continues to wreak havoc on the aerospace industry.

Completing the deal means that MHI is doubling down yet again on its costly attempt to break into the regional jet market and become one of few companies in the world capable of designing, manufacturing and integrating a passenger aircraft.

The company has spent years struggling to win approval for its own SpaceJet aircraft. Acquiring Bombardier’s ageing programme for $550m in cash brings the Japanese company a ready-made maintenance, support and refurbishment network around the world.

Completion of the deal comes shortly after the collapse of a similar agreement for Boeing to buy the regional jet division of Embraer. It means that MHI will now face off against the Brazilian company in the global market for jet airliners with less than 100 seats.

MHI said it was hard to forecast the future cash flows of its SpaceJet division at present. It would therefore write off all the acquired goodwill and intangible assets from Bombardier in its accounts to March 2021.

China services companies cut jobs at fastest rate since 2005

China’s services sector contracted for a third consecutive month in April as the pandemic hit business and companies cut staff at the fastest rate since 2005, a private survey found.

The Caixin-Markit services purchasing managers’ index rose to 44.4 in April, an improvement on the 43 level for March. A figure below 50 marks a deterioration in conditions.

New business fell for a third month, although the decline had eased from February when the Chinese government imposed strict restrictions on when companies could resume work to control the coronavirus outbreak.

Export sales dropped at the second-fastest pace on record as global clients faced lockdowns in their own countries.

Companies cut staff at the fastest rate since the survey began in late 2005.

“The second shockwave for China’s economy brought about by shrinking overseas demand should not be underestimated in the second quarter,” said Zhengsheng Zhong, chairman and chief economist at CEBM group.

State media says all parts of China now at low risk for coronavirus

Christian Shepherd in Beijing

All of China is now considered low risk for coronavirus, state media announced, even as President Xi Jinping warned of the continued threat of a resurgence.

The decision to lower the threat level in the city of Mudanjiang in north-east Heilongjiang province, which faced a small cluster outbreak last month, meant there were no more high risk areas in China, state broadcaster CCTV said on Thursday.

Despite the milestone, Mr Xi told the ruling Communist party’s Politburo standing committee on Wednesday evening that “considerable uncertainty” remains, due to continued spread of the virus outside of China.

Colombia declares second ‘state of economic emergency’

Gideon Long in Bogotá

Colombia has declared a second “state of economic emergency” in response to coronavirus — a move that allows the president to issue decrees to bolster the economy without parliamentary consent.

In a televised address, President Iván Duque said that with the country in lockdown until May 25, the move was necessary to support thousands of workers and businesses hit by the pandemic.

He said the government would subsidise the wages of workers from companies that can show that their turnover has dropped by 20 per cent or more due to the virus. Businesses will also be allowed to defer tax payments until next year.

This is the second time Mr Duque has announced an economic state of emergency since the outbreak began. The first expired late last month.

Colombia boasted the fastest-growing economy among major Latin American nations last year, with gross domestic product up 3.4 per cent, but economic activity is expected to drop sharply this year not only because of the lockdown but also due to the fall in the price of oil, the country’s most valuable export commodity.

The third most populous country in Latin America, Colombia has recorded 8,859 cases of coronavirus and 397 deaths — relatively low figures per capita.

Coronavirus hits illegal drug supply chains

Andres Schipani in São Paulo, Gideon Long in Bogotá and Jude Webber in Mexico City

The coronavirus pandemic has hit cocaine traffickers, a UN report has found, as global lockdowns have brought transport to a near-standstill and disrupted a business that relies on legal trade to “camouflage” its activities and on individuals being able to distribute drugs to consumers.

“The measures implemented by governments to counter the Covid-19 pandemic have thus inevitably affected all aspects of the illegal drug markets, from the production and trafficking of drugs to their consumption,” according to the report from the UN Office on Drugs and Crime.

Anticipating a slowdown in trade from Covid-19, drug traffickers had increased shipments just ahead of the imposition of lockdowns, only to be trounced due to a number of seizures.

In the first three months of this year, UNODC confiscated 17.5 tonnes of cocaine bound for Europe coming from South America. In Rotterdam, confiscations shot up from 4.1 tonnes in the first quarter of last year to 6.6 tonnes in the same period this year.

Read more here

Amazon tribes appeal to the world for help to fight coronavirus

Andres Schipani in São Paulo

Amazonian indigenous groups on Wednesday slammed the “inaction” of governments in the face of coronavirus in the world’s largest tropical rainforest calling for donations to help them survive the pandemic.

The Amazon Emergency Fund wants to raise $8m in two months to help over 3m indigenous people who live in the vast rainforest and are vulnerable to the Covid-19 due poor healthcare and sanitation, said COICA, a grouping of Amazonian indigenous people from nine different countries.

“If the governments of the region are not going to help, let the international community do so,” said José Gregorio Diaz Mirabal, general co-ordinator of COICA and a member of the Wakuenai Kurripaco people from Venezuela. “States always talk about the sovereign power of the territory, but such power goes hand-in-hand with the responsibility of caring for their people.”

COICA warned that as the virus spreads through the Amazon basin, indigenous peoples are “disproportionately vulnerable to disease”. The goal of the fundraising campaign is to provide food and medicine, as well as protection against impending intrusions on indigenous lands.

“Covid-19, which affects the whole world, has reached indigenous territories putting our lives at risk. But it should be said that this virus joins other pre-existing threats, of which we are permanently living with in indigenous communities. Such threats are the direct environmental contamination due to the indiscriminate exploitation of natural resources, which limits access to public health,” said Francinara Soares Baré, native of the Baré people in Brazil.

The struggle of Amazonian indigenous peoples has gained renewed prominence since Brazilian President Jair Bolsonaro took office last year. These indigenous groups have long enjoyed a symbiotic relationship with the rainforest, living off the land and protecting it in turn. As deforestation gains pace, they find themselves vulnerable.

Mr Bolsonaro has condemned what he sees as excessive legal protection for Brazil’s ethnic groups and the sheer size of their constitutionally mandated land reserves.

Taiwan keeps its borders shut to keep coronavirus out

Kathrin Hille in Taipei

Taiwan’s borders will remain sealed to foreigners as it prepares to loosen some restrictions on key economic activity, with officials indicating travel will only return to normal when a vaccine is found.

Chen Shih-chung, the health minister, said on Wednesday that while the government would try to gradually allow some foreigners to enter for important economic activity that could not be conducted remotely, the country was not even close to discussing a broader lifting of an entry ban on foreign nationals imposed to keep the disease out.

Taipei’s caution, despite its early success at containing the virus, serves as a stark reminder of the difficulties countries face when mapping exit strategies from epidemic prevention regimes, as governments in Europe, some US states, Australia and New Zealand attempt to ease lockdowns.

Taiwan has become a global role model for its handling of Covid-19 as it has recorded only 439 confirmed cases and six deaths. Early screening of arriving travellers and border closures, thorough contact tracing and meticulous quarantine measures helped contain the virus before it could spread in the community.

Read more here.

Budweiser APAC sees improvement in China, South Korea markets

Budweiser APAC reported a loss in the first quarter as the Covid-19 outbreak hit sales, but the brewer noted an improvement in China and South Korea since mid-March after the two countries eased restrictions introduced to control the spread of coronavirus.

Anheuser-Busch InBev’s Asian-listed operation reported a $6m loss in the first three months of 2020, with revenue down 39 per cent year on year at $956m, it said on Thursday. The company said normalised earnings before interest, taxes, depreciation and amortisation fell 68 per cent to $171m.

The brewer of Budweiser, Corona and Stella Artois, said its business “had been improving consistently week over week driven by a recovery in China and South Korea” since mid-March.

Volumes in China were down by around 17 per cent in April against the same period in 2019 and compared with a 46.5 per cent fall in the first quarter. The company warned in February that it had seen “almost no activity in the nightlife channel”.

“Starting in March, we have observed an encouraging trend of business recovery as various government incentives were implemented to stimulate business recovery and consumer spending (e.g., e-coupons),” the company said of its business in China.

China introduced strict limits on the movement of people from the end of January as coronavirus spread across the country, but these restrictions have slowly been reduced and businesses have reopened. Wuhan, where the pandemic started, reopened in early April.

Budweiser APAC said it was difficult to estimate the impact of India’s lockdown and prohibition on the sale of alcohol on its business, while it was “starting to experience the impact of the pandemic” in south-east Asia.

News you might have missed

Brazil’s central bank on Wednesday announced it would slash 0.75 percentage points off the benchmark interest rate as a growing political crisis compounds the economic damage from coronavirus.

Poland’s presidential election is set to be postponed, after the ruling Law and Justice party abandoned its attempts to push ahead with a poll on May 10.

Two-thirds of New York victims fell ill at home, new data show, compared with 18 per cent at a nursing home. Most were also non-essential workers, meaning they were not regularly braving public transportation and other potential hazards to do their job. More than a third were retired.

Spain’s parliament has granted the government’s request to prolong the extraordinary legal order that underpins the country’s lockdown.

Vladimir Putin has backed calls to begin easing a national lockdown despite a steady growth in Covid-19 cases, as a poll showed the pandemic has driven the Russian president’s approval ratings to the lowest level in two decades.

An additional 649 fatalities means the confirmed coronavirus death total in Britain has topped 30,000.

Corporate news latest

Rideshare company Lyft delivered strong results in its first quarter, but declined to offer investors much insight into the impact of coronavirus on its business in April, or what might lie further ahead.

US retailer Gap announced it would reopen up to 800 of its stores by the end of this month as states nationwide gradually begin to ease lockdowns.

Delphi Technologies, a car engine components manufacturer, agreed to a lower takeover offer from BorgWarner after its rival claimed that it breached the terms of the $3.3bn deal when it tapped out a credit revolver in response to the coronavirus pandemic.

Uber is to cut 3,700 jobs, roughly 14 per cent of its corporate workforce, blaming the blow to business caused by the coronavirus pandemic.

Asia-Pacific stocks broadly lower ahead of China trade data

Stock markets in Asia-Pacific dipped on Thursday ahead of China trade figures that are expected to give more clues on the extent of the disruption brought by the pandemic.

Japan’s Topix was down 0.8 per cent on its return from a holiday break, the Kospi in South Korea slipped 0.4 per cent and Australia’s S&P/ASX 200 was flat.

China will release its April trade figures on Thursday morning as well as the purchasing managers’ index for the country’s services sector.

Overnight, the S&P 500 ended 0.7 per cent lower as Donald Trump pushed for the country’s economy to reopen and as an increase in US inventories pushed down oil prices.

S&P 500 futures edged up 0.1 per cent.

West Texas Intermediate, the US marker, was down 0.9 per cent at $23.78 in morning trading in Asia, after snapping a six-day run of gains on Wednesday.

US death toll tops 67,000

Peter Wells in New York

Nearly 2,000 people died in the US over the past day, taking the total number of fatalities in the country above 67,000.

The daily increase of 1,949 was a moderation from Tuesday’s rise of 2,527, according to data compiled by the Covid Tracking Project on Wednesday.

New Jersey saw the biggest increase, with a further 305 deaths over the past 24 hours. That took the total in the second hardest hit state to 8,549 since the pandemic began.

New York, the hardest hit state, recorded 232 deaths, although levels in the past few days are down from recent weeks. Massachusetts had the third-largest daily increase, with 208 deaths.

Pennsylvania, which on Tuesday saw a state record increase on Tuesday of 554, moderated to 94 deaths over the past 24 hours.

Since the outbreak began, 67,256 people have died in the US, according to CTP.

PPP going to areas with pre-existing bank relationships

Mamta Badkar in New York

A new study by economists at the New York Federal Reserve adds to evidence that emergency small business loans have not gone to areas hit hardest by the coronavirus pandemic. Instead, they have been concentrated with companies that have pre-existing relationships with banks that process loan applications.

New York, New Jersey, Michigan and Pennsylvania, which were some of the hardest hit by the pandemic, received fewer loans from the Paycheck Protection Program — or PPP, designed to keep small businesses afloat during the coronavirus crisis — than some Mountain and Midwest states, economists at the New York Fed said.

Using coronavirus cases as a proxy for the economic impact from the outbreak, they said:

In New York, the epicentre of the coronavirus in the United States, less than 20 per cent of small businesses have been approved to receive PPP loans. In contrast, more than 55 per cent of small businesses in Nebraska are expecting PPP funding.

Instead, they found, “that lenders’ preference for borrowers with an existing relationship and the market share of community banks are the main factors explaining the geographical variation in PPP funding”. Despite the first-come, first-served nature of PPP, it is quicker for banks to accept loan applications from existing customers as they already have relevant information and can screen them faster.

The study is likely to further fan complaints that communities that have been less affected by the disease have been among the biggest recipients of the emergency loans. The first $350bn tranche of PPP funding was exhausted on April 16 and the programme was relaunched with $310bn in additional funding late last month.

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