Coronavirus latest: Fauci warns against relaxing US lockdowns too early

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India to launch $266bn economic stimulus package

Amy Kazmin in New Delhi

Indian Prime Minister Narendra Modi has announced plans for a $266bn stimulus package — equivalent to around 10 per cent of gross domestic product — to help the stalled economy recover from a seven-week coronavirus lockdown.

Mr Modi gave no precise details about the components of the package, which will be unveiled by finance minister Nirmala Sitharaman on Wednesday. But he said the package would provide support to industry, small and medium enterprises, the self-employed, farmers and others who have been hit by the lockdown.

The premier announced the relief package on a primetime television address to the nation, during the eighth week of one of the world’s strictest anti-coronavirus lockdowns, which has brought the economy almost to a standstill.

In his speech, Mr Modi said India needed to look forward towards reviving the economy, including long-term reforms to help ensure that “the 21st century will be the Indian century”.

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Fauci says autumn second wave is ‘entirely conceivable’

Kiran Stacey in Washington

Anthony Fauci, one of the senior members of the White House coronavirus task force, has warned of the possibility of a second wave of cases later this year, directly contradicting the president’s assertion that the disease might simply disappear.

Dr Fauci told a Senate health committee hearing: “When you talk about, what if this virus just disappears — I’ve said publicly many times that is just not going to happen, because it’s such a highly transmissible virus.

“A rebound, a second wave in the fall, is entirely conceivable and possible.”

But he added: “I hope that if we do have a second wave, we will be able to deal with it very effectively, to prevent it from becoming an outbreak, not only worse than now, but much much less.”

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Fauci warns reopening too soon could result in fresh outbreaks

Kiran Stacey in Washington

Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases, has warned US states and cities against relaxing their lockdowns too early, saying that such moves could prompt new coronavirus outbreaks.

Speaking to a Senate committee hearing on Thursday, Dr Fauci warned:

If you … [see] that gradual decrease over 14 days, that will allow you to go to phase one. And then if you pass the checkpoints of phase one, go to phase two and phase three. If some areas, cities, states or what have you, jump over those various checkpoints, and prematurely open up without having the capability of being able to respond effectively and efficiently, my concern is that we will start to see little spikes that might turn into outbreaks.

Dr Fauci was speaking after several states began to open their economies again, with the apparent encouragement of President Donald Trump.

Junk bond ETFs rise as Fed begins purchase programme

Anna Gross in London

Junk bond exchange traded funds rose on Tuesday, as the Federal Reserve entered its hotly anticipated corporate bond programme which forms part of its plan to create a backstop for ailing US companies.

Junk bond ETFs gained around 0.5 per cent in trading on Tuesday morning, on the first day in which the Fed purchased funds that invest in corporate bonds, injecting liquidity into the market and easing borrowing costs for US businesses through the downturn caused by coronavirus.

In a shock move last month, the Fed added junk bond ETFs to the corporate bond and credit ETF buying programme it announced in March — an unprecedented initiative run by BlackRock in which it will purchase exchange-traded funds that track the corporate debt market.

As a result, US companies sold almost $32bn of junk bonds in April, marking the biggest month of fundraising by low-rated issuers in three years, as news of the support from the Fed spread through credit markets.

IMF to downgrade global economic outlook again

Jonathan Wheatley in London

The hit to the global economy from the coronavirus crisis will be even worse than predicted less than a month ago, Kristalina Georgieva, managing director of the IMF, said on Tuesday.

Ms Georgieva said the IMF would release “sometime in June” a downward revision of its outlook for the global economy published on April 14, which predicted a contraction of 3 per cent in global output, with emerging and developing economies contracting by 1 per cent and advanced economies by 6 per cent.

“With the crisis still spreading, the outlook is worse than our already pessimistic projection,” she said in an interview during the Financial Times’ Global Boardroom online conference. “Without medical solutions on a global scale, for many economies a more adverse development is likely.”

Ms Georgieva said the IMF’s previous prediction, that emerging and developing countries would need $2.5tn to see them through the crisis, would also be revised upwards.

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Potential drug shows limited impact in early trials, Fauci says

Kiran Stacey in Washington

Remdesivir, the potential coronavirus treatment praised by Donald Trump as “the hot thing”, has demonstrated only a “really modest” impact on patients, according to Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases.

Early trials of the drug, which is being developed by Gilead Sciences, showed some effectiveness in tackling the virus but its impact seemed to be limited, Dr Fauci said.

He told a Senate hearing on Tuesday:

Let me take a moment to describe a placebo-controlled randomised trial, which was done internationally, with a power of more than 1,000 individuals and sites throughout the world. It was in hospitalised patients with lung disease, the endpoint was primarily time to recovery.

The result was statistically significant, but really modest, and we must remember it was only a modest result, showing that the drug made a 31 per cent faster time recovery.

Trump urges California to let Tesla reopen factory

Donald Trump weighed in on a battle between Elon Musk and local authorities in California, urging officials to allow Tesla to reopen its factory.

“California should let Tesla & [Elon Musk] open the plant, NOW. It can be done Fast & Safely!” the president tweeted on Tuesday.

Mr Musk, chief executive of Tesla, said on Monday the electric car maker’s plant in Fremont, California, would restart production in defiance of the local health authority. “I will be on the line with everyone else. If anyone is arrested, I ask that it only be me,” he said.

The move came after Tesla sued Alameda County over the weekend, with Mr Musk arguing that the county’s coronavirus-related shutdown order ran counter to the governor’s policy that allowed manufacturers to reopen as early as last week. He has also threatened to move Tesla’s headquarters to Texas or Nevada.

Governor Gavin Newsom said he expected that Tesla and Alameda County can resolve the dispute as early as next week.

Coronavirus daily death rate falls to six-week low

Steven Bernard, Senior Visual Journalist

The lowest number of daily deaths since March 30 were recorded yesterday, as 3,393 people died from coronavirus, bringing the death toll over 280,000.

In the US, a further 837 people died on Monday, pulling the rate of new deaths down to its lowest since March 31.

The country also recorded its lowest number of new infections for seven weeks with an additional 17,605 cases, according to data from the Covid Tracking Project.

Globally, the number of newly confirmed Covid-19 cases rose by 70,644‬ yesterday, the smallest daily increase for two weeks, according to data from the European Centre for Disease Prevention and Control.

Brazil remains the worst affected country outside of the US measure by the number of deaths. It registered 396 fatalities yesterday bringing the death toll to 11,519. Its number of new cases was only surpassed by the US and Russia as a further 5,632 infections were recorded, bringing the total to 168,331 in Latin America’s hardest-hit country.

Russia’s new infection rate is now second behind the US, as an additional 10,899 cases were registered on Monday. This is the tenth straight day that it has reported 10,000 or more new cases. However, its death toll has remained low with just over 2,000 deaths recorded.

Explore data about the pandemic to better understand the disease’s spread and trajectory in the live-updating and customisable version of the Financial Times’ Covid-19 tracker.

Gambling Commission releases protocols for online betting

Alice Hancock in London

The UK’s gambling regulator has issued new protocols for online betting companies after it found that some punters were spending more money and time on online games during lockdown.

The guidelines issued by the Gambling Commission call for online operators to stop offering bonuses or promotions to customers who show problematic gambling habits and to contact those who have been playing for over an hour on a single game among other measures.

The Gambling Commission said that while overall gambling had decreased due to the closure of casinos and betting shops, and the cancellation of major sports fixtures, two thirds of regular gamblers had increased either the time or money they spent on betting during lockdown.

In April, the regulator came under fire from MPs for being ineffectual in its monitoring of the industry just as the sector agreed its own moratorium on TV and radio advertising while the lockdown restrictions were in place.

GameStop, a nationwide self-exclusion service for gamblers, said that it had seen a spike in the number of gamblers trying to remove their self-imposed restrictions since March.

US lacks tests needed to reopen institutions such as universities

Kiran Stacey in Washington

The US does not have enough coronavirus tests to reopen its economy fully, the Republican chair of the Senate health committee has said, despite the president’s claim that anyone who wants a test can get one.

Despite a sharp rise in the number of people being tested, the US lacks the testing capacity needed to reopen institutions such as universities, Lamar Alexander said during a hearing on Tuesday.

His comments come a day after Donald Trump repeated his claim that “if somebody wants to be tested right now they’ll be able to be tested”.

“What our country has done so far in testing is impressive, but not nearly enough,” Mr Alexander said.

It is not enough to provide confidence to 31,000 students and faculty members who we hope will show up at the University of Tennessee campus in August when school starts.

India’s industrial output plummets in early sign of damage ahead

Amy Kazmin in New Delhi

India’s industrial production contracted by 16.7 per cent year on year in March, as output was hit by one of the world’s strictest lockdowns, imposed by prime minister Narendra Modi towards the end of that month.

The 16.7 per cent contraction – which compared to a 4.7 per cent increase a year earlier – was the worst reading on record. It offers an early indicator of the extent of the damage inflicted on India’s economy by the lockdown enforced in a bid to control the spread of coronavirus.

Most of India’s economic activities – and nearly all public transportation – were brought to a halt on March 22, as India observed a one-day “people’s curfew,” as a symbolic gesture of determination to defeat coronavirus. Two days later, Mr Modi stunned the nation as he imposed a strict 21-day nationwide curfew.

Analysts said worse was yet to come in April – when lockdown was in force the entire month – and May. Authorities are now easing restrictions, and trying to encourage business to restart operations, but most companies expect a long, arduous process to restart their factories, which are likely to operate at just a fraction of capacity.

India was unable to release its headline April consumer price index data, which was also due to be released today, as the lockdown impacted the operations of the Central Statistical Office, and made it impossible to carry out the in-person shop visits on which such data is based.

However, the CSO said that food price inflation rose 8.6 percent year on year in April, up from 7.8 percent the year before, which analysts said likely reflected supply disruptions as a result of the lockdown.

US stocks open higher

Global stock markets were steady on Tuesday as investors monitored the gradual reopening of the world economy and signs of new infections in countries that have loosened lockdown measures.

Shares on Wall Street opened higher, and were on track for a fourth successive day of gains. The benchmark S&P 500 and the tech-heavy Nasdaq advanced 0.4 per cent in the first minutes of trading.

Investors are monitoring the reopening of major economies, looking for signs of any flare-ups of the virus that could stall progress.

Ryanair chief hits out at UK plan to quarantine airline travellers

Tanya Powley, Transport Correspondent

Michael O’Leary, chief executive of Ryanair Group, criticised the UK’s plan for a 14-day quarantine on arriving passengers, calling it “nonsense” with “no scientific basis” behind it.

In an interview at the FT Global Boardroom conference on Tuesday, Mr O’Leary said: “We can’t be imposing these entirely arbitrary and non-scientific 14-day isolations which are entirely unenforceable and un-policeable anyway.”

He added: “This is a country that can’t even do testing and tracing, never mind following up on people on where they are spending their 14 day isolation.”

Mr O’Leary also asked how it could be scientific if both the French and Irish were exempt from such quarantine measures.

It comes as Ryanair laid out plans to resume about 40 per cent of its normal flight schedule from July 1. The airline plans to make crew and passengers wear masks, and will ban people from queuing for the toilet on board the flight. It also believes temperature checks at airports should be part of the measures to resume flying.

Mr O’Leary said the airline had already seen a “surge of bookings” on Tuesday.
Ryanair plans to increase its capacity to about 60 per cent in August, and up to 70 per cent by September, in line with passenger demand, he added.

Bank of England’s Broadbent does not fully dismiss negative rates

The UK’s central bank deputy governor did not completely rule out cutting interest rates to negative levels, a nod from the Bank of England that it is prepared to take steps that it has never done in the past to protect the economy from a crushing coronavirus blow.

“The committee is certainly prepared to do what’s necessary within our remit,” said Ben Broadbent, the deputy governor of the Bank of England, in an interview on Tuesday. “With the risks still tilted to the downside, yes, it’s quite possible that more monetary easing will be needed over time.”

The central bank’s monetary policy committee voted unanimously last week to hold interest rates at 0.1 per cent.

In its latest monetary policy report, published on May 7, the Bank of England forecast that the coronavirus crisis would push the UK economy into its deepest recession in 300 years, with output plunging almost 30 per cent in the first half of the year, but voted not to launch a new stimulus.

Two of the nine MPC members, the report revealed, voted to increase quantitative easing by another £100bn immediately, seeking more stimulus to prevent greater scarring of the economy later.

“The very reason that central banks conducted asset purchases was because they felt that interest rates were reaching some effective lower bound,” Mr Broadbent told CNBC.

“At these levels, you have to think about obviously the beneficial effects directly of cutting interest rates on demand, but also what might the potential effects be on the balance sheets of financial intermediaries,” Mr Broadbent said to the US business news channel.

And whether you cut rates beyond some limit, you actually risk doing more harm than good.

Travel industry calls for global health and testing standards

Alice Hancock in London

The head of the World Travel and Tourism Council has warned that, without a global set of health and testing standards for airlines, hotels and travel companies, consumers will not feel safe to travel again, putting the future of the $8.9tn travel industry at risk.

The industry will only be able to recover from the shutdown in international travel “if we implement the right standards throughout the world”, Gloria Guevara said at the Financial Times’ Global Boardroom conference on Tuesday,

Governments are not co-ordinating their efforts, which made consumers feel uncertain about what safe procedures are in place, Ms Guevara added.

In order to bring back your confidence to travel again it needs to be the same. If you are going to wear a mask on a flight it needs to be on all the flights.

The WTTC released coronavirus protocols for hotels and travel retail businesses on Tuesday. Standards for airlines and cruise ships are still being worked on.

Unilateral action by governments such as the UK and Spain to enforce quarantine on international travellers will put those countries at a “competitive disadvantage”, Ms Guevara warned.

The travel industry accounts for more than 10 per cent of global gross domestic product and about 330m jobs, many of which have been put at risk due to the coronavirus crisis.

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US core consumer inflation posts largest monthly decline on record

Core consumer prices in the US, an underlying measure of inflation, fell in April by the most on record as coronavirus lockdowns weighed on demand for everything from fuel to clothing and airline fares.

Core CPI, which strips out volatile items like food and petrol, fell 0.4 per cent in April from the previous month, the largest monthly decline on records going back to 1957, the labour department said on Tuesday.

That compared with economists’ expectations for a narrower 0.2 per cent slide and left core price pressures up 1.4 per cent from a year ago.

Concerns have grown that the impact of the Covid-19 economic crisis will be strongly disinflationary and this could slow the economic recovery. “The disinflationary impulse, along with the great disruption in economic and financial market activity, is a key reason why the Fed has unleashed vast new monetary policy stimulus,” said Gregory Draco, economist at Oxford Economics. “A surge in inflation is the least of our worries.”

Headline consumer prices fell 0.8 per cent month-on-month — the largest such decline since December 2008 and in line with expectations. That left CPI up 0.3 per cent from a year ago.

Consumer prices were weighed down by a 20.6 per cent drop in gasoline prices, but the report showed sharp declines in prices for clothing, airline fares, motor vehicle insurance and lodging.

However, the report showed food prices jumped, with the index for food at home posting its biggest monthly increase since 1974. The index for meats, poultry, fish, and eggs increased the most, up 4.3 per cent as the index for eggs increased 16.1 percent. Wholesale meat prices have surged as meat plant workers became sick and slaughterhouses were closed.

SLA shareholders revolt against virtual meetings

Chris Flood in London

Standard Life Aberdeen suffered a substantial revolt by shareholders angered by the Edinburgh-based asset manager’s decision to hold a “virtual” annual meeting today at which no investors were present because of coronavirus.

Just under 37.4 per cent of investors voted against Standard Life Aberdeen’s proposal allowing it to convene shareholder meetings remotely, a change that the company had expected to be accepted as uncontroversial and appropriate given the ongoing pandemic.

The protest is the first significant revolt against virtual shareholder meetings at a FTSE 350 company this year.

In a statement, Standard Life Aberdeen said it had no plans to abolish the traditional annual meeting in Edinburgh. It added that:

The board recognises the importance of the AGM and values engaging with shareholders, in particular due to the strong retail shareholding in the company. The board has no plans to do away with physical meetings, but believes that allowing shareholders to also participate by electronic means would be in the interests of shareholders.

SLA intends to engage with its institutional shareholders over their concerns and plans to publish an update on its findings within six months.

ISS, the proxy adviser, had recommended that shareholders vote against SLA’s proposal to hold virtual meetings as the investment company had not provided a commitment to revert to holding a physical or hybrid meeting when it was again able to do so.

Peter Reilly, senior director of corporate governance at FTI Consulting, said:

There has been a clear acknowledgement from shareholders that AGMs will have to be different this year; however, that should not be viewed as a blank cheque for companies. Given how important AGMs are to board accountability, if proper safeguards and commitments are not in place to ensure all investors have a voice, shareholders remain willing to register significant dissent against companies.

EmoticonPutin spokesman hospitalised

Henry Foy in Moscow

Vladimir Putin’s spokesman Dmitry Peskov has been hospitalised with coronavirus.

Mr Peskov, who is also Mr Putin’s deputy chief of staff and one of the most prominent members of the president’s senior team, told state run newswires that he had tested positive for Covid-19 and was being treated.

Russia recorded a 10th consecutive day of more than 10,000 new coronavirus infections on Tuesday, as the country’s total number of cases rose to become the world’s second largest, after the US, according to data from Johns Hopkins university.

The pandemic has become one of the biggest challenges to Mr Putin’s 20 year rule, plunging the economy into crisis and pulling down his approval rating. The country’s prime minister and two other ministers have already tested positive.

Mr Peskov had previously told reporters that Mr Putin is healthy and is tested regularly.

US small businesses’ sales outlook hits lowest on record

US small business owners’ outlook for their own sales over the next six months weakened to its lowest level in more than four decades as stay-at-home orders and the closure of non-essential companies amid the coronavirus pandemic took a toll on the economy.

The National Federation of Independent Business gauge of real sales expectations fell 30 points to minus 42 in April, the lowest reading in the survey’s 46-year history. However, reports of expected better business conditions in the next six months increased 24 points to 29.

“Presumably this divergence captures the idea that the overall economy can’t get much worse, so the future has to be better than the past, but business owners remain very depressed about their own position,” said Ian Shepherdson, economist at Pantheon Macroeconomics. “The details show hiring plans down to an eight-year low, while capex plans dropped to a 10-year low.”

Meanwhile, the headline small business optimism index fell 5.5 points to 90.9 — a seven-year low but better than consensus expectations for a drop to 83.

The survey pointed out that owners were starting to benefit from the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Emergency Advance (EIDL), both Covid-19 related programmes. “Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation,” NFIB chief economist William Dunkelberg, said.

V-shaped recovery looks increasingly unlikely, BHP says

Neil Hume in London

A V-shaped economic recovery from the coronavirus pandemic is increasingly unlikely, according to the world’s biggest mining company, which is preparing to cut spending on exploration and expansion projects.

BHP chief Mike Henry noted tens of millions of people had lost their jobs across developed economies, while more than 1bn workers in the informal labour markets of developing economies have also had their livelihoods affected, when speaking at a virtual metals and mining conference hosted by BofA Securities.

“Re-establishing these livelihoods will take time and consumption will be inevitably constrained, making a V-shaped recovery increasingly unlikely,” he said. “By the end of 2021, our base case has the global economy roughly 4 per cent smaller than it would have been if Covid-19 had not happened.”

Mr Henry said that while the Anglo-Australian miner was in a good position to weather “times like these”, it would still look to match capital and exploration expenditure to market “circumstances”. He added:

We will look to defer some, where that makes sense for value or to preserve cash. We’ll have further detail on this at the full year [results in June].

On a brighter note, Mr Henry said pig, or crude, steel production in China could rise this year if the country avoided a second wave of coronavirus infections. BHP is a major producer of key steel-making ingredient iron ore.

German officials reassure public after string of local outbreaks

Guy Chazan in Berlin

German officials have sought to reassure the public over the recent spike in the reproduction number for coronavirus cases, saying it would probably hover around one for some time to come, as the rate of infection plateaus.

Lars Schaade, vice president of the Robert Koch Institute, said the number of new cases of coronavirus was falling in Germany.

“This means that individual outbreaks have a bigger effect on the reproduction number than was previously the case,” he said.

Germany has in recent days seen a string of local outbreaks of coronavirus in abattoirs, meat factories and in several old people’s homes. Mr Schaade said these had affected the R-number, which over the weekend rose above one for the first time in weeks.

The reproduction number is the average number of new cases generated by an infected individual. If R is above one, an outbreak expands exponentially — the higher the number the faster it grows.

Mr Schaade said that once the latest local outbreaks have been brought under control, “the R-number will fall again”. He said the decline in cases was becoming “increasingly flat, and we are approaching a plateau of daily case numbers”.

The Robert Koch Institute plans in future to publish a “more evened-out R-number”, “in which the fluctuations are smoothed out”.

“This will be better suited to showing more long-term trends,” Mr Schaade said.

The RKI announced that as of this morning, Germany had 170,508 cases of coronavirus infection, 933 more than the previous day. As many as 7,533 people have died of Covid-19, 116 more than in the previous 24 hours, and 147,200 people had fully recovered from the illness.

CBI chief shows support for government guidelines

The head of Britain’s largest business group has backed the UK government guidelines to return the country to work safely.

The guidance, which has come under criticism for being confusing and potentially putting employees at risk, is “quite good” and “quite detailed”, Carolyn Fairbairn, the CBI director-general, said on Tuesday at a global digital conference organised by the Financial Times.

“We have been arguing for flexibility within a framework,” she said. “There are gaps but I think it is a good step forward.”

The representative for British businesses added that some interdependencies between different guidelines such as reopening businesses, public transport and the supply of protective equipment had not yet been fully worked through.

Her comments came after the opposition Labour party, union leaders and the government’s scientific advisory group criticised the UK prime minister for attempting to bounce people back to work without allowing time to establish arrangements for safe workplaces.

The strategy, which comes into force on Wednesday, aims to encourage vital sectors of the economy such as manufacturing and construction back to work. It adds that others should work at home if they can.

Northern Ireland will wait to lift lockdown restrictions

Arthur Beesley in Dublin

Northern Ireland’s executive will trigger a phased lifting of coronavirus restrictions later than the UK government, under a lockdown exit plan that diverges from the path set out by prime minister Boris Johnson.

Northern Ireland’s leaders made it clear on Tuesday that restrictions that have largely shut its economy, and left tens of thousands of workers on furlough, will stay in place. The statement came just days after Mr Johnson outlined a plan to lift lockdown measures in England.

“We decided collectively that the time is not right for making major steps,” first minister Arlene Foster of the Democratic Unionists told the regional assembly at Stormont.

“Our decisions must be based on what is happening here taking account of our particular circumstances within the four nations approach. Differences and nuances between the jurisdictions in the UK will emerge.”

Although the executive is not scheduled to review the lockdown again until May 28, Mrs Foster said it will consider whether some “modest steps” can be taken before then.

In a 12-page document published on Tuesday, the executive did not set any timetable for the lifting of restrictions.

Rosneft to cut 2020 investment by more than 20%

Henry Foy in Moscow

Russia’s biggest oil company Rosneft will cut its capital expenditure by more than 20 per cent this year as it scrambles to adjust to the crash in oil prices caused by the coronavirus pandemic.

Rosneft, which is controlled by the Kremlin, accounts for close to half of Russia’s total crude output, and is the world’s second-largest listed oil producer after Saudi Aramco.

Igor Sechin, the company’s chief executive, told Russian president Vladimir Putin on Tuesday that it would reduce its capital expenditure by 21 per cent from last year’s Rbs 950bn, due to the crisis.

“Given, let’s say, the dramatic state of the global oil market as a whole and in connection with the decisions taken to reduce production, we will, of course, have to optimise part of the capital costs,” Mr Sechin said, according to a transcript published by the Kremlin.

Mr Sechin, a longtime aide to Mr Putin and widely considered one of Russia’s most powerful men, also asked the president for help in increasing loan availability, deferring tax payments on exploration projects and reducing the cost of oil transportation tariffs.

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UK to extend job furlough scheme until October

George Parker and Chris Giles in London

Rishi Sunak, the chancellor, has announced plans to extend the UK government’s flagship job retention scheme until the end of October, but he will gradually scale back a programme that has supported over 7m jobs at a cost of £14bn a month.

Mr Sunak said the furlough scheme, due to expire at the end of June, was not sustainable in the long term but he concluded that a “cliff edge” withdrawal of state support would have triggered mass unemployment.

The chancellor will attempt to gradually wean the economy off the huge job subsidy scheme, which currently pays 80 per cent of the wages of an employee who cannot work, up to a monthly cap of £2,500.

Mr Sunak said the scheme would continue as present until the end of July, but it would be amended between August and the end of October to “provide greater flexibility to support the transition back to work”.

Between August and October he would allow payments to furloughed staff working part time and also ask employers to “share the cost” of paying their salaries, cutting the cost to the taxpayer. Details would be announced later.

About a fifth of the workforce has been furloughed at the state’s expense. The Office for Budget Responsibility estimated last week that by the end of June, the scheme would have cost £49bn – or £14bn a month over three and a half months.

UK researchers call for government to rethink Covid-19 strategy

Camilla Hodgson in London

A group of researchers in the UK has urged the government to rethink its “dangerous” Covid-19 strategy, which it said would “inevitably” lead to local epidemics and further lockdowns.

A report prepared by an independent group of scientists chaired by the government’s former chief scientific adviser called on the government to “take all necessary measures to control the virus through suppression and not simply managing its spread”.

“Evidence must show that Covid-19 transmission is controlled before measures are relaxed,” it said.

The researchers said the goal of simply “flattening the curve” or ensuring the NHS is not overwhelmed was “counterproductive and potentially dangerous.”

If the virus is not suppressed, there will be numerous local epidemics, resulting in more deaths and potentially further partial or national lockdowns, they said.

The group also criticised the early decision to stop tracking and tracing infections in the community, and said it was crucial that the government implement a two-week quarantine period for anyone entering the country as soon as possible.

UK government lays out its advice to workers in England

Sebastian Payne in London

The UK government advises commuters in England to alter their travelling habits to allow for social distancing while anyone who can work at home must do so, the government in its guidance for employees says.

The Department for Transport has urged people to avoid public transport wherever possible. Those who need to travel to work should cycle, walk or drive.

For commuters who have to use public transport, Boris Johnson’s government advises the public to:

• Keep two meters apart whenever possible
• Wear face coverings
• Use contactless payment methods
• Avoid travelling during rush hour
• Wash your hands before and after travel
• Be considerate to staff and other passengers

The advice, published on Tuesday, suggests that passengers should “start or end your journey using a station or mode of transport you know to be quieter or more direct” and walk part of the journey.

For instances when passengers cannot avoid close contact with others, the official advice suggests they should “try to face away from other people, and keep the time you spend near others as short as possible”.

The government has asked train and bus operators to increase the number of available services.

Air traffic will suffer for years, warns Frankfurt’s airport boss

Olaf Storbeck in Frankfurt

The chief executive of Germany’s largest airport expects a slow and drawn-out recovery in global air traffic after the coronavirus pandemic, warning that a return to pre-crisis passenger levels will take more than three years.

“I would be really happy if we see 30 to 35 per cent of [2019] traffic by November or December,” Stefan Schulte, the chief executive of Frankfurt Airport, told journalists on a video call. He added that even by 2023, passenger numbers are likely to be 15 to 20 per cent lower than before the pandemic.

At the moment, passenger numbers at Germany’s busiest airport have collapsed by more than 95 per cent. “Basically all our revenue has dropped away,” he said.

Mr Schulte expects that companies will permanently cut the number of business trips as video conferencing will replace a certain number of routine meetings. He also predicted that ticket prices will rise as some airlines will go out of business during the pandemic, resulting in less competition. The looming recession and rise in unemployment would also dent households’ demand for leisure flights.

Excess UK deaths in coronavirus outbreak top 50,000

Our economics editor Chris Giles has analysed the full ONS release on the latest deaths from the virus.

He writes:

The number of UK deaths during the coronavirus outbreak over and above normal levels has exceeded 50,000, the data released on Tuesday confirmed.

The Office for National Statistics said that, in the week ending May 1, there had been 17,953 deaths in England and Wales recorded, 8,012 higher than the average of the past five years in that week, as the disease killed three times the normal number of people in care homes.

This represented the seventh consecutive week that deaths exceeded normal levels and once equivalent figures from Scotland and Northern Ireland were included, takes total mortality across the UK during the pandemic to 50,979.

At present this is the highest absolute level of excess deaths in Europe, although figures for Italy are not yet comparable because they only extend to the end of March.

The official figures from the UK’s statistical agencies are much higher than the daily announcement from the Department of Health and Social Care, which stands at 32,065.

Four in 10 recent Covid-19 deaths in England and Wales in care homes

Deaths in care homes from Covid-19 have accounted for 40 per cent of fatalities from the virus in recent days, the Office for National Statistics has said.

In material published on Tuesday morning, the ONS said:

In the most recent days, the proportion of deaths occurring in care homes has accounted for 40.4% of all deaths involving COVID-19.

This chart, dated up to May 1, shows how care home fatalities have rose as a proportion of all deaths from the virus:

The data also showed, however, that the number of deaths involving Covid-19 has decreased for the second week in a row.

The number of death registrations involving the coronavirus was 6,035 in the week to May 1, down from 8,237 in the preceding week.

But the proportion of deaths occurring in care homes could increase calls for more protection of residents and staff at these facilities, particularly following widespread complaints that the government has not protected them adequately with testing or personal protective equipment.

Read the full ONS data release here.

EU to back travel industry issuing vouchers over cash refunds

Javier Espinoza in Brussels

Brussels has made a case for ailing travel companies to favour vouchers instead of cash refunds as a way of seeing them through the pandemic, according to a document that sets out travel guidelines for the summer within the bloc.

The EU encourages travel companies to make vouchers “attractive” to consumers to entice them to choose them over cash, according to guidelines, set to be published on Wednesday and seen by the Financial Times.

The document says “attractive, voluntary” vouchers can be a “win-win” for both travellers and firms.

It says carriers and travel operators should give “incentives for passengers and travellers to accept vouchers instead of reimbursement, vouchers should be protected against insolvency of the issuer and be refundable after at most one year if not redeemed”. It adds:

Operators should also combine certain characteristics to make vouchers attractive for passengers or travellers. For example, vouchers should provide flexibility on the range of services for which they can be used and their transferability.

In the EU’s view, these incentives would lead to more confident passengers when it came to booking their summer holidays.

EU regulators will also call on member states to take part in a coordinated effort to re-open their borders. The guidelines say:

As member states manage to reduce the circulation of the virus, blanket restrictions to free movement to and from other areas or regions in member states with a similar overall risk profile should be replaced by more targeted measures, as a complement to physical distancing measures and effective tracing and testing of any suspected cases.

Government has obligation to support businesses, says Mervyn King

Mervyn King, a former central bank governor, has said the government has a duty to support struggling businesses during the coronavirus shutdown.

Wage subsidies should be extended as the downturn bites in the coming months, the former Bank of England chief said.

“If the government decided for very good reasons to support the economy then it has an obligation to support businesses,” Sir Mervyn said on Tuesday speaking on the BBC’s Today programme, “so that they don’t go into insolvency and disappear before the economy recovers.”

Sir Mervyn, who helped steer the economy during the 2008-09 financial crisis, said he thought the chancellor should extend the support schemes to give businesses “needed comfort” over the next few months.

“It could be made flexible to allow for part-time work. A simple straightforward extension adding whatever flexibility makes sense,” he said, adding the payments should be kept at 80 per cent of wages and not reduced to 60 per cent.

“The real cost of this shutdown is not measured by the impacts on public finances but by the lost incomes and output in the economy. A cost which is likely to end up as an order of magnitude…. of several hundred billion pounds.”

Author Murakami to host radio show to lift Japanese spirits

Best-selling author Haruki Murakami will broadcast a special radio show to lift the nation’s spirits as the state of emergency is extended in Japan until the end of May.

The award-winning novelist, who used to run a jazz club and hosts a radio show once every other month, will play songs from his own record player at home during the two-hour special.

“I’m hoping that the power of music can blow away even a little bit of the corona-related blues that have been piling up,” the novelist said on the broadcaster’s website.

Japan has not implemented a complete lockdown, opting instead for a state of emergency, under which governors can request business closures. The Abe administration is considering whether to lift the state of emergency earlier than the end of May for some prefectures where new cases of the virus are in decline.

Mr Murakami’s radio show will be broadcast at 10pm local time on May 22 on Tokyo FM.

Ireland’s AIB expects €210m in credit losses

Arthur Beesley in Dublin

Allied Irish Banks has set aside €210m for an expected increase in bad loans arising from coronavirus, warning that it will face “larger” costs later as the full impact of the pandemic becomes clear.

In a quarterly market update on Tuesday, Ireland’s largest bank by market capitalisation said it expects to separately incur €150m-€175m in exceptional costs this year. Such charges include restitution and operating costs linked to a long-running mortgage overcharging scandal in several Irish banks.

The bank said the €210m charge for expected credit losses in the first quarter of its financial year reflects changes in macroeconomic assumptions, “with further impact of the crisis expected to be felt” in the second quarter.

Its shares, down almost 71 per cent in the year to date, were down 2 per cent in Dublin at 90.5 cent in early Tuesday trading. They dropped 14.8 per cent on Monday after a downbeat update from rival Bank of Ireland.

AIB said it has €6.6bn exposure to sectors most at risk — comprising 11 per cent of its book — including loans to hotels, bars, restaurants, the motor trade, non-food retail, travel, leisure and shopping centres. The bank expects “some movement downwards” in the quality of loans to such sectors and others, potentially.

Net interest income in the three months to March was about 5 per cent lower than in the same 2019 quarter, mainly due to lower average customer loan volumes and lower investment yields. The net interest margin in the first quarter was 2.19 per cent, below the 2.25 per cent reported in the final 2019 quarter.

AIB did not provide a profit or loss figure for the first quarter. With the Irish economy in deep recession due to sweeping Covid-19 restrictions, it withdrew guidance for net interest income this year of about €2bn, non-performing loans of less than 4 per cent and 2-3 per cent cost inflation.

Some 49,598 AIB customers with loans totalling €3.27bn are availing of payment
breaks under a government-sponsored scheme to deal with Covid-19. “The group remains financially and operationally resilient amid heightened uncertainty,” said AIB.

French economic activity down 27% in April

Victor Mallet in Paris

The French economy improved slightly during the country’s coronavirus lockdown in April, with activity in a typical week down about 27 per cent from previously, compared with a decline of 32 per cent in March, the Banque de France estimated in its monthly business survey on Tuesday.

France’s central bank said the fall in industry and construction was slightly less severe in April than at the end of March at the start of the lockdown, while services for business were less badly hit than those for households.

Industry was operating at 46 per cent of capacity, the lowest level on record, down from 77 per cent in February and 56 per cent in March.

For May, business leaders expected a partial recovery of their operations, but the bank said the situation was too uncertain for it to give its usual gross domestic product prediction for the current quarter.

France’s lockdown began on March 17 and was partially eased from Monday May 11.


Graph shows industry capacity utilisation. Source: Banque de France

Wuhan launches mass testing drive after discovery of new cluster

Christian Shepherd in Beijing

Wuhan has launched a 10-day push to test all residents for coronavirus, after a cluster of infections was discovered a month after lockdown ended in the Chinese city where the virus was discovered.

The city’s epidemic response team has ordered that testing for Covid-19 should be carried out in all neighbourhoods across the city, according to an official notice that has been circulated widely on Chinese social media.

News website The Paper, owned by state-backed Shanghai United Media Group, confirmed the document’s authenticity.

Each neighbourhood must submit an action plan within 10 days and special attention should be paid to older parts of the city, densely populated areas and places with large migrant populations, the notice said.

The order — first reported by Reuters — comes after six new infections were discovered in a single residential compound over the weekend.

The Hubei Daily newspaper, an official outlet of the provincial leadership, said on Tuesday that a central government team dispatched to Wuhan had already inspected contagion prevention measures in three neighbourhoods in the vicinity of the cluster and recommended an expansion of testing.

The discovery ended a 35-day stretch of zero new locally transmitted cases in the city. The cluster also raised fears about hidden asymptomatic carriers being a lingering risk for resurgence.

Russia records over 100,000 new coronavirus cases in the past 10 days

Henry Foy in Moscow

Russia reported a 10th straight day of more than 10,000 new coronavirus cases on Tuesday and a record number of daily deaths from the virus, as it became the world’s second most affected country after the US, according to John Hopkins data.

The country said it had recorded 10,899 new Covid-19 infections on Tuesday to take its total number to 232,243, and 107 new deaths.

The official death toll now stands at 2,116, but an FT analysis of all-cause mortality data from Moscow and St Petersburg in April suggests the true total could be 70 per cent higher.

President Vladimir Putin on Monday lifted a federal stay-at-home order after six weeks of lockdown, but many local authorities, including Moscow and the surrounding area, tightened quarantine rules on Tuesday, including making face masks and gloves mandatory on public transport and in shops.

UK health secretary defends new rule to meet only one other person

Jim Pickard in London

Matt Hancock has defended the rule that people will only be allowed to meet one other person – at a distance and outdoors – as part of the easing of the UK government’s lockdown.

Critics have questioned why people will be able to meet one parent but not both at the same time, saying that the policy does not make sense if those parents live together.

But Mr Hancock, the health secretary, said the policy reflected the fact that the government was determined to prevent large groups gathering. He told the BBC Radio 4 Today programme:

These things are a judgment. What we don’t want is large groups gathering. You have to make a judgment about what is reasonable and where to set the rules.

Mr Hancock said it was “perfectly reasonable” to have a rule that only one person can meet another, at a distance of two metres, outdoors.

“A rule that you can only meet up with one other person just protects everyone against that burgeoning into large groups of people,” he said.

What you may have missed

BP’s new chief executive said the coronavirus hit to crude consumption was likely to endure beyond the pandemic — and may even have ushered in “peak oil” demand.

The mass testing that is central to lockdown exit plans in many countries is unrealistic because of high costs and lack of production capacity, according to the boss of an Italian biotech company that supplies tests around the world.

Scores of mysterious deaths in northern Nigeria have sparked speculation that coronavirus may be moving untracked through Africa’s most populous nation.

Singapore has allowed some businesses to reopen, as the city state takes its first steps towards resuming economic activity.

China has suspended imports of red meat from four Australian abattoirs in a move analysts said was “politically motivated punishment” for Canberra’s call for an inquiry into the origins of the coronavirus pandemic. It comes amid reports that Beijing’s emissaries have over the past two months substituted courtesy for intimidation.

Toyota has warned of an 80 per cent collapse in operating profits over the next 12 months, but the world’s second-largest carmaker projected US and European car sales to fully recover by early 2021.

More than 2,000 police officers in South Korea have been mobilised to track down about 3,000 clubbers who visited clubs and bars in a multicultural party district of downtown Seoul as the number of cases linked to the area rose to more than 100.

The World Health Organization has cautioned against the assumption that populations might develop “herd immunity” to Covid-19 if strict social distancing measures are not put in place, calling the idea “a really dangerous calculation”.

Spain to enforce a 14-day quarantine for new arrivals

Daniel Dombey in Madrid

Spain will require people entering the country to observe a 14-day quarantine, in a decision that follows similar moves by the UK and elsewhere.

The requirement, which will come into effect on midnight on Friday, is likely to be a further obstacle for the recovery of the country’s €150bn tourism market, which represents about 12 per cent of gross domestic product.

Under the conditions set out in the new rules, people will have to remain in their home during the quarantine period, limiting their visits outside to buying food, pharmaceuticals and other essential products, travelling to clinics or hospitals or for other extraordinary reasons.

Flight crew, truckers and cross-border workers are exempt from the requirement, but travel agencies, tour operators and transport companies are obliged to inform their clients about it before they buy tickets to Spain.

Spain has reduced both the coronavirus infection rate and the death rate considerably in recent weeks.

Landsec reveals £1.2bn hit to property portfolio from Covid-19

George Hammond

Landsec, one of the UK’s largest property companies, has warned that there will be no recovery from coronavirus until 2022 at the earliest, as it announced a near 10 per cent hit to the value of its portfolio.

The total value of the company’s estate, which includes Deutsche Bank’s new London headquarters 21 Moorfields, fell 8.8 per cent, or £1.18bn, to £12.8bn over the year. 

“While it is too early to predict outcomes with any certainty, it seems prudent to plan for more business failures and higher vacancy rates across our portfolio, in particular leisure and retail,” said the company. 

In the short-term, the virus has hit the company’s rent-take hard. With much of its portfolio of offices and shops shut as a result of the pandemic, Landsec had received just 63 per cent of its rent 10 days after it was due on March 25, compared with 94 per cent at the same point a year earlier. 

“June rent collection rates are likely to be worse than March given that most of the negative economic impact from Covid-19 has fallen in the second quarter,” said Landsec. 

UK corporate news round-up

Landsec, a commercial property developer, warned that it did not expect economic recovery to pre-crisis levels before 2022 “at the earliest”, as it planned for more business failures and higher vacancy rates, particularly in the leisure and retail sectors. Usage of its offices was below 10 per cent as employees worked from home, it added.

Wm Morrison said the precipitous decline in fuel sales at its supermarkets was affecting working capital and debt, as it reported that retail sales excluding fuel were up 5.1 per cent in the first quarter.

Ryanair is to restart flying about 40 per cent of its normal scheduled flights from July 1 as it plots its recovery from the coronavirus pandemic that has grounded aircraft around the world.

Home improvement group Kingfisher reported that revenues fell 24 per cent in the first quarter compared with the previous year due to temporary closures of its stores such as B&Q and Castorama in markets across Europe.

Standard Life Aberdeen said that estimated net outflows in the first four months of the year reached £24bn, of which £25bn was related to withdrawals by Lloyds Banking Group, reducing assets under management to £490bn.

Telecoms provider Vodafone said that Covid-19 had led to lower revenue from roaming charges, which was offset by a significant increase in data volumes, as the group said that earnings in the next financial year were expected to be flat or slightly down.

Saudi Aramco profits slide 25% after oil price collapse

Anjli Raval, Senior Energy Correspondent

Saudi Aramco reported a 25 per cent drop in first-quarter earnings as the kingdom’s biggest revenue earner suffered from a collapse in oil prices and a demand crunch stemming from the coronavirus pandemic, in a further squeeze to the producer nation’s finances.

Saudi Arabia’s state energy company reported net income of $16.7bn in the first three months of this year, from $22.2bn in the same period a year ago, as lockdowns and travel bans to contain the virus hit global demand for oil by a third from pre-crisis levels.

The oil price collapse by more than half since January is wreaking havoc on the kingdom’s finances, with Saudi Arabia forced to enact austerity measures to conserve cash — from cutting capital spending to raising VAT and cancelling cost-of-living allowances for state employees.

Amin Nasser, Saudi Aramco’s chief executive, said: “The Covid-19 crisis is unlike anything the world has experienced in recent history”. Looking ahead, he said, the impact of the pandemic on global energy demand and oil prices would weigh on earnings.

Vodafone warns Covid-19 could knock it to annual profit fall

Nic Fildes

Vodafone has said its earnings for the year to March 2021 could fall as a result of the impact of the coronavirus pandemic.

The telecoms company’s revenues grew by 3 per cent to €45bn in the year to March 2020 and reported a pre-tax profit of €795m compared with a €2.6bn loss in the previous year. Its adjusted earnings before interest, taxation, depreciation and amortisation — the metric against which it provides guidance — grew 2.6 per cent to €14.9bn. Vodafone had debt of €42.2bn at the end of the year.

Vodafone paid a dividend of 9c for the year. The company cut its payout last year and had been tipped by some analysts to reduce it further after BT cancelled its annual payment for the first time since privatisation last week.

The London-based company said that it had hit guidance which was raised in November and said its business model was resilient to the economic impact following the spread of Covid-19. Nonetheless it said that it expected its adjusted ebitda to be flat or slightly down in this financial year due to the uncertain economic outlook and a reduction in roaming revenue due to lower tourism and business travel.

Vodafone expanded its European customer base to 65m mobile users and 25m broadband customers in the year to March. It derives more than three-quarters of its revenue from Europe, having merged and deconsolidated operations in markets including India and Australia in recent years.

Germany is by far its largest market accounting for a third of its profit and producing a stable result. Vodafone’s performance in Italy and Spain was weaker during the year.

In the UK, where it does not own a consumer broadband network, services revenue grew 0.5 per cent and adjusted ebitda more than 10 per cent. Virgin Media, seen as a potential merger partner for Vodafone in its home market, agreed a £31bn merger with O2 last week.

European stocks on course for muted open

Global stocks slipped on Tuesday, as investors monitored the gradual reopening of parts of the world economy and signs of new infections in early movers.

European markets were set for a muted open, with futures trade pointing to modest declines across the region’s main indices.

Asian shares slipped as risk sentiment soured overnight, while on Wall Street futures tied to the S&P 500 fell 0.8 per cent.

Jim Reid, strategist at Deutsche Bank, said a pick-up in cases in some countries which had reopened their economies was one of the causes for the risk-off sentiment.

Fears have emerged over a possible second wave of infections in parts of Asia, with Wuhan — the origin of the virus in China — this week reporting its first cluster of new infections since relaxing quarantine measures.

Low-cost carrier Ryanair to restore 40% of flight schedule in July

Tanya Powley

Ryanair is to restart flying about 40 per cent of its normal flight schedules from July 1 as it plots its recovery from the coronavirus pandemic that has grounded aircraft around the world.

Europe’s largest low-cost carrier on Tuesday laid out plans to resume flights from most of its 80 bases across the continent. Since the Covid-19 flight restrictions in mid-March, it has been operating just a skeleton of 30 flights between Ireland, the UK and Europe. From July, it will increase this to almost 1,000 flights a day.

Ryanair said its plans were subject to government restrictions on intra-EU flights being lifted and effective health measures being put in place at airports.

It said passengers should wear face masks or face coverings at all times in the terminal and on board aircraft, and should check in online and check in fewer bags. It added that queuing for toilets will be prohibited on board but toilets will still be accessible to individual passengers upon request. Its cabin crew will also wear face masks or face coverings.

For a temporary time, Ryanair will require all passengers flying in July and August to fill in details at check in of how long their planned visit will be and also their holiday address. This information will be given to EU governments to help them monitor any isolation regulations they require.

Morrisons says jump in grocery sales offset by fuel slump

Jonathan Eley

Wm Morrison said the precipitous decline in fuel sales at its supermarkets had affected its working capital and debt levels and that it would continue to defer any decision on special dividends until later in the year.

For the first quarter of its fiscal year, retail sales excluding fuel were up 5.1 per cent, accelerating to 9.6 per cent in the most recent two-week period.

But including fuel, group same-stores sales fell 3.9 per cent in the first quarter. In common with rivals, Morrisons said that petrol sales had fallen up to 70 per cent as locked down Britons took fewer trips.

“In the near term, the negative fuel [sales growth] is having a temporary impact on working capital and net debt, which we expect to reverse quickly when fuel sales normalise”.

Like rivals, Morrisons said the cost of factors such as increased staff absence and protective measures in stores was broadly offset by the business rates holiday on most of its stores.

“As these costs and profit impacts are more weighted to the first half of our financial year and the rates relief benefit more to the second half, we expect the net adverse impact on profit to be considerably more weighted to the first half” it said.

Allianz operating profit plunges on coronavirus impact

Olaf Storbeck in Frankfurt

German insurance giant Allianz suffered a 22 per cent year-on-year drop in first-quarter operating profit as its property and casualty insurance business was hit by the economic fallout of the coronavirus pandemic.

At €2.3bn, earnings before interest and tax for the quarter were still slightly ahead of analysts’ expectations, according to consensus survey collected by the company.

Last month, Allianz warned investors that it would be unable to meet its full-year target of €11.5bn-€12.5bn as the pandemic had darkened the macroeconomic outlook. The Munich-based group on Tuesday said it needed more time to come up with a revised profit target.

In the property and casualty insurance unit, operating profit was 29 per cent lower than a year ago. “Covid-19 has aggravated operating conditions in [that] segment,” chief financial officer Giulio Terzariol said in a statement.

Its life and health insurance business reported a 25 per cent drop in operating profit in the quarter, while a 19 per cent increase in operating profit of the group’s asset management division could only partly offset the negative developments in the insurance business.

The group’s solvency II ratio, a measure of balance sheet strength, fell by 23 percentage points to 190 per cent, still above the group’s minimum target of 180 per cent.

Toyota warns of 80% drop in operating profits on coronavirus disruptions

Kana Inagaki in Tokyo

Toyota has warned of an 80 per cent collapse in operating profits over the next 12 months, but the world’s second-largest carmaker projected US and European car sales to fully recover by early 2021.

The conservative forecast came as the Japanese carmaker said that it had tapped into a ¥1.25tn ($11.6bn) credit line to bolster its already cash-heavy balance sheet to weather the coronavirus crisis.

For the fiscal year through March 2021, the company said it expected an operating profit of ¥500bn compared with a year-earlier profit of ¥2.4tn. That was well below analyst expectations for a profit of ¥1.8tn, according to S&P Global Market Intelligence.

It also expects global vehicle sales to drop from 10.5m last fiscal year to 8.9m.

The supply chain disruptions, the shutdown of car plants worldwide and falling consumer demand wiped off ¥160bn from its operating profits during the January to March quarter, resulting in a 27 per cent year-on-year decline in fourth-quarter profit.

“We are seeing the seeds of recovery as plant capacity in the US and Europe begin to recover,” Kenta Kon, Toyota’s chief financial officer, said at an online press conference on Tuesday. “But the situation still does not allow us to have a clear outlook for a definite recovery.”

Toyota shares fell as much as 2.6 per cent following the results announcement.

Asia stocks fall on fears over new coronavirus infections

Hudson Lockett in Hong Kong

Stocks across Asia fell on new concerns over the impact of the coronavirus pandemic in the region, despite signs that other parts of the global economy were preparing to ease lockdowns.

In Hong Kong the benchmark Hang Seng index fell 1.8 per cent while Japan’s Topix index slipped 0.3 per cent. China’s benchmark CSI 300 shed 0.5 per cent after data showed producer prices fell at the fastest pace in four years in April as virus-weakened global demand hit the country’s industrial economy.

South Korea’s Kospi index shed 0.7 per cent on Tuesday morning after authorities reported a cluster of new Covid-19 infections tied to an outbreak in Seoul’s nightlife district. That has raised concerns of a second round of infections in the country.

Australia’s S&P/ASX 200 shed 1.2 per cent after the national broadcaster reported that China had imposed a ban on some of the country’s red meat exports, in a move that could escalate trade tensions.

Fears have emerged over a possible second wave of infections in parts of Asia, with Wuhan — the origin of the virus in China — this week reporting its first cluster of new infections since relaxing quarantine measures.

Meanwhile, Brent crude, the international oil benchmark, was up 0.2 per cent at $29.69 a barrel but slightly below the important $30 threshold breached last week. West Texas Intermediate, the US marker, rose 0.8 per cent to $24.33.

China suspends imports of red meat from four Australian abattoirs

Jamie Smyth in Sydney

China has suspended imports of red meat from four Australian abattoirs in a move that comes amid deteriorating diplomatic relations between the nations over Canberra’s call last month for an independent inquiry into the origins of the coronavirus.

The beef ban follows Beijing’s warning last week that it is considering imposing punitive tariffs on Australian barley exports — a move that would further escalate trade tensions with Canberra, which has accused China of threatening “economic coercion” during the coronavirus pandemic.

Simon Birmingham, Australia’s trade minister, said on Tuesday the government had been notified that supply from four meat establishments had been suspended by Chinese authorities over issues relating to labelling and health certificate requirements.

“We are concerned that the suspensions appear to be based on highly technical issues, which in some cases date back more than a year,” he said.

The meat processors are owned by Brazilian beef giant JBS, Australia’s Northern Meat Company and Kilcoy Pastoral Company, which is owned by the Chinese company Hosen Capital, according to Australia’s national broadcaster, ABC.

Industry experts said the four affected abattoirs process more than a fifth of Australia’s A$2bn ($1.3bn) a year beef exports to China and the suspensions would have a financial impact on the industry.

China previously cited concerns over labelling and health certificates in 2017 when it temporarily banned beef imports from six Australian processors. But analysts said the timing of the current suspension, which comes just weeks after Beijing accused Canberra of teaming up with Washington to launch “a political campaign” against China over a coronavirus inquiry, suggests it was a “government-led, and politically motivated, punishment”.

“If this is, as it seems, a deliberate attempt to punish Australia, then it certainly gives the lie to Beijing’s previous statements, that there might be a consumer-led boycott of Australian goods,” said Richard McGregor, analyst at the Lowy Institute. “Australia should complain loudly about this, not just to stand up for its exporters, but to remind other countries around the world that this is how China behaves if you dare to cross them.”

China factory gate prices fall at fastest pace in 4 years

Christian Shepherd in Beijing

The price of goods exiting China’s factories extended a fall in April, the latest sign that the country’s producers continue to face pressure from the coronavirus pandemic.

The country’s producer price index fell by 3.1 per cent year-on-year last month, compared with a 1.5 per cent fall in March, the National Bureau of Statistics announced on Tuesday. That was the largest fall since April 2016.

The bureau said the pandemic and a slump in international commodities markets, especially oil, had dragged down Chinese producers’ prices.

At the same time, China’s consumer price index — a measure of the prices of food, everyday goods and services — rose by 3.3 per cent, significantly lower than the increases seen during the peak of the country’s outbreak, the bureau said.

CPI hit an eight-year high of 5.4 per cent year-on-year in January, driven in part by a shortage of pork that led to escalating prices. February and March CPI increases were 5.2 and 4.3 per cent respectively.

Weeks after the country rolled back the majority of large-scale lockdowns, China’s economic recovery remains hampered by repeated small outbreaks and the impact of global markets reeling from the pandemic.

Seoul rules that air-conditioned buses can run with windows open

Song Jung-a in Seoul

Seoul city authorities have announced that air-conditioned buses will be allowed to run with their windows open to try to limit the spread of coronavirus as a new cluster from a popular nightlife district in the capital fuelled concerns about a second wave of infections in South Korea.

The city’s government had previously required air-conditioned buses run with windows closed as part of its energy-saving efforts. The policy change has been implemented due to fears that air conditioning systems in enclosed spaces could spread the virus.

The announcement is the latest involving transportation. The city on Monday made wearing face masks mandatory for mass transit subway passengers during peak hours.

Health authorities have called for more vigilance to counter the easing of social distancing restrictions.

Federal Reserve to begin buying corporate bond ETFs

Colby Smith in New York

The Federal Reserve will begin buying eligible corporate bond exchange traded funds on Tuesday, more than a month after it announced it would lend support to the asset class in a dramatic expansion of its crisis-fighting toolkit.

On Monday, the New York arm of the central bank announced the official launch of its facility to shore up the secondary market for corporate credit. It will purchase ETFs that own both investment-grade and high-yield debt and seek to track the markets.

In March, the Fed committed to buy ETFs and corporate debt directly from the secondary market, as well as roll out a separate facility to buy debt directly from issuers across corporate America.

It later expanded the size of scope of these facilities, unveiling in April that it would boost the size from a combined $200bn to $750bn and would add junk bond ETFs to the list of assets it will buy.

The move shocked investors, and helped to stabilise the market enough so that riskier borrowers could easily access fresh funding.

“The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to US investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to US high-yield corporate bonds,” the Fed said in a statement.

The decision to prop up corporate debt markets came alongside other emergency measures aimed at staving off a broader financial crisis as a result of the coronavirus outbreak. In addition to slashing rates to zero and pledging to buy an unlimited quantity of government debt, the Fed also announced its support for the markets for commercial paper and municipal debt, among others.

The Treasury department agreed to provide $75bn in equity for the corporate debt facilities, and as of Monday, had already fulfilled $37.5bn of that. In its statement, the Fed also said its purchases of eligible corporate bonds from the secondary market and from issuers directly would begin “in the near future”.

South Korea mobilises police to trace Seoul clubbers

Song Jung-a in Seoul

More than 2,000 police officers in South Korea have been mobilised to track down about 3,000 clubbers who visited clubs and bars in a multicultural party district of downtown Seoul as the number of cases linked to the area rose to more than 100.

The outbreak has raised concerns of a second wave of infections and comes as a particular disappointment after the country reported no local infection for a few days in late April.

South Korea reported 27 new infections on Tuesday.

The new outbreak, which has highlighted the risks of escaping economically crippling lockdowns, has forced Seoul to shut down bars and clubs again in a reversal of the recent easing of social distancing measures.

South Korea has also postponed the reopening of schools by a week to May 20 as health authorities warned against a possible rapid growth from the cluster of infections.

Mike Ryan, the emergency chief of the World Health Organization, on Monday praised the robust contact-tracing employed by countries such as South Korea and Germany, adding that many other nations exiting lockdowns were effectively driving blind.

Japanese manufacturers rush to develop ‘cool’ face masks for summer

Robin Harding in Tokyo

Japanese companies are racing to develop special “summer” face masks because of concerns about heat stroke during the hot and humid months of July and August.

Dehydration and heat stroke are regular problems in the Japanese summer but this year many people will weather them with a mask across their mouth, trapping heat.

Marui Orimono, a textiles company based in Ishikawa prefecture, has started selling “cool” masks, which promise better heat conductivity with the skin in order to give a cooler feel.

Temperatures have gone above 30C in parts of Japan this week as the summer heat begins. Daily highs above 35C with relative humidity of 90 per cent are common in July.

According to the Nikkan Sports newspaper, a company in Yamagata prefecture has started selling regular face masks from vending machines for soft drinks, chilled to a few degrees above zero.

China reports 1 new coronavirus case

Health authorities in China reported one new coronavirus case to the end of Monday, down from 17 cases a day earlier as the city where the virus was first detected reported its first cluster since lockdown measures were lifted.

The new case on Monday was found in Inner Mongolia in a person who had returned from overseas. The autonomous region borders Mongolia and Russia. That new case brings the total number of reported Covid-19 cases in mainland China to 82,919.

China on Monday reported five new cases discovered in a single residential community in Wuhan, the first confirmed infections in the city since April 3, sparking fears of a second wave in the city where the virus originated.

There were no new deaths, meaning the tally for reported fatalities linked to Covid-19 stands at 4,633.

A total of 15 people tested positive for the virus but showed no symptoms.

Some of the latest corporate developments

Boris Johnson’s announcement of a 14-day quarantine for air arrivals in the UK has come as a “surprise”, the head of IAG, British Airways’ parent group, said, and would hinder recovery from an unprecedented downturn in aviation.

Starbucks will reopen 15 per cent of its UK stores from Thursday for drive thru and collection as businesses begin to show signs of starting up again.

Commerzbank ditched its plan to sell its majority stake in mBank after the Polish lender’s share price fell by more than 50 per cent this year.

General Mills boosted its outlook as consumers began to eat more meals at home after orders to stay at home took effect and restaurants closed or limited meals to take-out and delivery in response to the pandemic.

Sportswear maker Under Armour said revenues fell by more than a fifth in the first quarter as its stores closed in response to the coronavirus pandemic, but reported signs of recovery in Asia.

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Elon Musk said he was willing to be arrested after Tesla resumed manufacturing cars at its plant in Fremont, California, defying orders from the county. California governor Gavin Newsom declined to intervene in the dispute between the Tesla chief executive and Alameda County.

Boris Johnson has urged members of the public who cannot work from home to “speak to their employer” about returning to the workplace as he cautioned there would not be a “sudden flood of people back to work” this week.

The Trump administration has ordered White House officials to wear face coverings as it responds to the first cases of coronavirus inside the West Wing.

Egypt has secured $2.7bn in emergency assistance from the IMF to counter the economic impact of the coronavirus pandemic.

The World Health Organization has cautioned against the assumption that populations might develop “herd immunity” to Covid-19 if strict social distancing measures are not put in place, calling the idea “a really dangerous calculation”.

Health officials in California were only able to identify three coronavirus sufferers through airport screening in the early days of the outbreak, according to new research from the US Centers for Disease Control and Prevention.

The Czech Republic has eased the rules on when its citizens need to wear masks in public, as it continues to scale back the extraordinary measures put in place to fight coronavirus.

The UK government is recommending the use of face coverings as part of its gradual strategy for ending the nation’s lockdown. But it also confirmed that social distancing measures will last for at least a year

Lowest number of daily Covid-19 deaths on a Sunday in six weeks

Steve Bernard in London

The lowest number of global daily deaths on a Sunday for the past six weeks were recorded yesterday, as 3,656 people died of the disease caused by coronavirus, bringing the death toll to 276,947. Figures tend to be lower at weekends owing to delays in reporting fatalities.

In the US, a further 979 people died on Sunday, the second-lowest daily rise since April 1. The total number of Covid-19 deaths since the pandemic began has risen to 74,270, according to data from the Covid Tracking Project.

Globally, the number of newly confirmed coronavirus cases surpassed 4m yesterday, as an additional 72,393‬ infections were recorded, according to data from the European Centre for Disease Prevention and Control.

Brazil was once again the country with the highest daily death toll outside of the US. It registered 496 fatalities yesterday, although this number is down from the peak of 751 just two days earlier. The number of newly confirmed cases was only surpassed by the US and Russia as a further 6,760 infections were recorded, bringing the total to 162,699 in the hardest-hit country in Latin America.

Russia continues to struggle to contain the spread of the virus as an additional 11,656 cases were confirmed. This is the ninth straight day that it has reported 10,000 or more new cases. The total number of cases in the country has now hit 221,344 surpassing both Italy and the UK. Only Spain and the United States have more confirmed cases of Covid-19.

Explore data about the pandemic to better understand the disease’s spread and trajectory in the live-updating and customisable version of the FT’s Covid-19 trajectory charts.

Asia-Pacific stocks fall after Wall Street finishes flat

Asia-Pacific equities struggled for direction on Tuesday morning following a lacklustre start to the week for Wall Street as New York’s governor said parts of the state were ready to reopen.

Japan’s Topix was down 0.1 per cent, the Kospi in Seoul was down 0.1 per cent and Australia’s S&P/ASX 200 was flat. S&P 500 futures pointed to a 0.3 per cent fall when US markets open on Tuesday.

Overnight in the US, the S&P 500 ended 0.02 per cent higher after Andrew Cuomo, New York governor, said parts of the state were ready to reopen and that other areas were “very close” behind. The state has been a hotspot for the virus in the US.

Concerns over a resurgence in coronavirus cases in Germany, South Korea and China had sparked fears of a second wave in economies that had begun to take steps to reopen.

US death rate rises at slowest pace since March

Peter Wells in New York

The number of coronavirus deaths in the US rose at the slowest rate since March, but still by enough to take the total number of fatalities over 75,000.

A further 837 people died over the past 24 hours, according to data compiled on Monday by the Covid Tracking Project, the smallest daily increase since March 31.

Monday death rates tend to be lower because of slower reporting, the Covid Tracking Project said, meaning the rate could “tick back up” on Tuesday.

New York, the hardest hit state, saw a further 162 deaths, but this was the first time since late March the daily increase has been under 200. Encouraged by these data, Governor Andrew Cuomo said earlier today some regions of the state were ready to gradually begin reopening their economies from Friday, when a statewide restriction order expires.

Massachusetts, with 129 deaths in the past day, had the next highest number. With 5,108 fatalities in total, the state recently passed Michigan to be the fourth hardest hit in the US.

Since the outbreak began, 75,107 people in the US have died from coronavirus.

Nearly 4m US mortgages in forbearance, industry group MBA says

Robert Armstrong in New York

About 4m US households or 7.9 per cent of mortgage borrowers had accepted payment forbearance as of the week of May 3, according to a survey from the Mortgage Bankers Association.

“The share of loans in forbearance increased, but the pace of the increase and incoming forbearance requests continued to slow,” said Mike Fratantoni, the MBA’s chief economist. Given the recent spike in unemployment, he said, “it will not be surprising if the forbearance numbers continue to rise.” He noted that call volumes on borrowers’ assistance lines were increasing.

The proportion of borrowers in forbearance rose from 7.5 per cent the week before. A month ago, the figure was 4 per cent.

Under the Cares Act, the federal government’s primary Covid-19 bailout law, mortgage borrowers can take as much as 12 months of mortgage payment forbearance without monetary penalty or any effect on credit ratings, if they state that they have lost their jobs because of the virus. No documentation is required. In most cases the missed payments will be made up by extending the term of the loan.

The survey includes some 38m borrowers, or more than three-quarters of the first mortgage market.





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