Major International Business Headlines Brief::: 19 September 2020
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Major International Business Headlines Brief::: 19 September 2020
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ü TikTok and WeChat: US to ban app downloads in 48 hours
ü Fake directors plan to combat money laundering
ü UK DIY sales soar but clothing stores fall behind
ü Fed’s Bullard says ‘biggest growth quarter of all time’ will lift inflation
ü Unity Software has strong opening, gaining 31% after pricing above its raised range
ü Bitcoin-based artwork smashes records, sells for $100K
ü Mobile banking startup Chime lands $485M mega-round at $14.5B valuation
ü How South African companies are coping with recession
ü Global stocks fall
ü SA retails sales contract
ü China EU top trading partner
ü Failed tests cripple UK economy
ü Coca-Cola bottlers feeling flat
ü Why young people can’t find work in South Africa: minister
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TikTok and WeChat: US to ban app downloads in 48 hours
TikTok and WeChat will be banned from US app stores from Sunday, unless President Donald Trump agrees to a last-minute deal.
The Department of Commerce said it would bar people in the US from downloading the messaging and video-sharing apps through any app store on any platform.
The Trump administration says the companies threaten national security and could pass user data to China.
But China and both companies deny this.
WeChat will effectively shut down in the US on Sunday, but people will still be able to use TikTok until 12 November, when it could also be fully banned.
Is the US about to split the internet?
What TikTokers make of Trump's ban threat
TikTok said it was "disappointed" in the order and disagreed with the commerce department, saying it had already committed to "unprecedented levels of additional transparency" in light of the Trump administration's concerns.
"We will continue to challenge the unjust executive order, which was enacted without due process and threatens to deprive the American people and small businesses across the US of a significant platform for both a voice and livelihoods."
Tencent - the owner of WeChat - said the announced restrictions were "unfortunate", but said they would continue talks with the US government "to achieve a long-term solution".
The ban order from the Department of Commerce follows President Trump's executive orders signed in August. It gave US businesses 45 days to stop working with either Chinese company.
If a planned partnership between US tech firm Oracle and TikTok owner ByteDance is agreed and approved by President Trump, the app will not be banned.
Mr Trump told reporters on Friday he believed there could be a deal on TikTok "quickly", adding that while the US needed "security from China", TikTok was "an amazing company, very very popular."
"Maybe we can keep a lot of people happy but have the security that we need," he said.
What does the order say?
"At the president's direction, we have taken significant action to combat China's malicious collection of American citizens' personal data," the US Department of Commerce Secretary Wilbur Ross said in a statement.
The department acknowledged that the threats posed by WeChat and TikTok were not identical but said that each collected "vast swathes of data from users, including network activity, location data, and browsing and search histories".
The order means that from Sunday, people will not be able to use WeChat to transfer funds or process payments to or from people in the US.
But TikTok users will still be able to use their app virtually as normal, although they will not be able to download new updates.
"The President has provided until November 12 for the national security concerns posed by TikTok to be resolved," the commerce department said. After this point, some technical transactions will be banned on the app and functionality will be affected.
Asked about the order on Fox Business Network, Mr Ross said that "the basic TikTok will stay intact until November 12", but added that WeChat "for all practical purposes... will be shut down in the US, but only in the US, as of midnight Monday".
This is now all about President Trump.
TikTok's owner, Bytedance, now has to try to find a more palatable deal - and this may be tough. It's been reported that China would rather TikTok be closed down than be forced to sell to the US.
What's not clear though is what Trump's motives are. Sure he wants to flex his muscle against China - and banning a popular app is a very high profile way of doing that - but he also, famously, loves a deal. With 48 hours to go until a potential ban, there is still negotiating time.
Is he trying to give US companies further leverage in any potential merger or acquisition?
In truth, even if a TikTok download ban comes into force, it will still run on peoples' phones. It won't start technically degrading until 12 November.
So there's still plenty of life left in this story.
Why does the US want the apps banned?
The Trump administration has repeatedly said the apps are a threat because of their collection of data.
Friday's statement from the commerce department said the governing Chinese Communist Party "has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the US."
ByteDance has denied that it holds any user data in China, saying it is stored in the US and in Singapore. Tencent, which owns WeChat, has said that messages on its app are private.
While TikTok has millions of users in the US, it is not clear how many of WeChat's billion users are based outside China, although it is likely to be a significant number.
But the US is not the only country concerned about the companies. India has already banned TikTok and WeChat, while the UK Information Commissioner's Office, a privacy watchdog, is currently investigating TikTok.
What are the apps?
TikTok is a video-sharing app. Users can post up to a minute of video and have access to a vast database of songs and filters.
It collects a huge amount of user data - including what videos people watch and comment on, location data, phone model and even how people type. But much of this data collection is similar to other social networks like Facebook.
In September the company said it had more than 100 million users. It is thought to have more than 800 million members around the world.
Teen's TikTok post about China camps goes viral
How much data does TikTok collect?
TikTok: The story of a social media giant
WeChat was set up in 2011. It is a multi-purpose app allowing users to send messages, make mobile payments and use local services. It has been described as an "app for everything" in China and has more than one billion monthly users.
Like all Chinese social media platforms, WeChat must censor content the government deems illegal. In March, a report said WeChat was censoring key words about the coronavirus outbreak from as early as 1 January.
But WeChat insists encryption means others cannot "snoop" on your messages, and that content such as text, audio and images are not stored on its servers - and are deleted once all intended recipients have read them.--BBC
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Fake directors plan to combat money laundering
The UK's record of companies is to be reformed to introduce proper checks on whether directors are real people, in an attempt to combat major crime.
The long-delayed reform, announced by the government, comes after years of evidence that Companies House is serially abused by gangsters and fraudsters.
The reform will finally force companies to prove who their directors are.
Experts on corruption and white collar crime say billions of pounds of illicit profits are laundered through the lax Companies House system every year.
While the announcement has been roundly welcomed by campaigners, it's not clear when the change will be implemented because it will require legal changes to be passed in Parliament.
What is Companies House?
Companies House is the UK's register of firms, their directors and the significant shareholders who control the business.
The register is such an important part of global business, it is searched million of times a day by people who need information on British companies.
But despite its importance to assuring the legitimacy of trade, directors don't need to prove who they actually are.
For years critics have said that this basic lack of identity-checking has allowed global criminal networks to make the UK the go-to destination for swift and invisible money-laundering.
Organised crime gangs set up front companies with fictitious directors and their profits disappear before they can be tracked down - not least because the directors cannot be traced.
'No place to hide'
Under the government's plan, directors will no longer be able to be appointed until their identity has been verified by Companies House.
Ministers say this simple change will help businesses and individuals know who they are dealing with - and help the National Crime Agency track down suspects.
Lord Callanan, Minister for Corporate Responsibility, said: "Mandatory identity verification will mean criminals have no place to hide... and ensure people cannot manipulate the UK market for their own financial gain."
The global scale of the problem became clear three years ago after a major investigation revealed how corrupt officials from Azerbaijan and Russia funnelled huge sums through UK companies run by fictional directors.
A separate Italian investigation found a British company, linked to the mafia, was supposedly run by a man whose name was listed as "The Hen Thief".
More recently, a former boss of the Naples mafia, told the BBC how he'd worked with British criminals to profit from exploiting Companies House' lax rules.
One estimate from Transparency International (TI), which investigates corruption, identified almost 1,000 front companies responsible for up to £137 billion of suspected criminal money flowing through the UK.
Steve Goodwich of TI said: "These much-needed reforms are already long overdue and should be tabled at the earliest possible opportunity.
"New powers for Companies House will be most effective if they are coupled with the introduction of transparency over the true owners of overseas companies holding UK property. This would strengthen our defences against illicit financial flows."
And Helena Wood, a financial crime expert at the Royal United Services Institute think tank, urged the government to give Companies House more resources to properly look into the background of potential directors.
"These reforms need to be accompanied by a review of Companies House's overall role, including a more explicit role for the Registrar of Companies as the protector of UK corporate integrity," she said.--BBC
UK DIY sales soar but clothing stores fall behind
British retail sales have continued to increase for the fourth consecutive month, boosted by spending on household goods and DIY, according to official figures.
The Office for National Statistics (ONS) said retail sales volumes rose by 0.8% between July and August.
Sales are now 4% higher than in March, when a pandemic was declared.
"Retail sales continued to grow, further surpassing their pre-pandemic level," the ONS said.
"Sales of household goods thrived as the demand for home improvement continued and, despite a dip this month, online sales remained high," said Jonathan Athow, deputy national statistician for economic statistics at the ONS.
Spending on household goods was particularly strong in August, with retailers reporting a 9.9% jump in sales of homeware products compared with the pre-pandemic levels seen in February.
But August's increase was smaller than the post-lockdown rebound seen in July, when retail sales volumes grew 3.6%.
High Street 'under pressure'
Online sales also fell by 2.5% in August when compared with the previous month. But the strong growth in the number of customers shopping online during the pandemic has meant that sales were still 46.8% higher than in February.
Although online retailers might have seen higher numbers of clicks in recent months, many High Street stores are still struggling to attract customers after lockdown measures were eased nationally.
The volume of items sold in clothing shops, for example, still stood 15.9% below February's pre-pandemic levels in August.
"Clothing stores continued to struggle with sales still well below their February level. Overall, the switch to greater online sales means the High Street remains under pressure," Mr Athow added.
'Mixed bag' recovery
Helen Dickinson, chief executive of the British Retail Consortium, said: "The recovery remains a mixed bag, with high growth in online sales, while city centre shops suffered as a result of low footfall."
She added: "With further lockdowns looming, the government must provide clarity on the impact it will have for shops.
"Retailers have invested hundreds of millions making stores safe and secure for customers during the pandemic; this includes perspex screens, social distancing measures and additional hygiene measures. As such, retail remains a safe space for consumers, even under local lockdowns."
While August saw some consumers returning to city centres to take advantage of the government's Eat Out to Help Out scheme, industry figures have suggested those areas might struggle to reach pre-pandemic levels of footfall.
Paint is in, stilettos are out.
They may be our shopping bills, but they're being carefully scrutinised by the chancellor and the Bank of England. For retail sales make up about a quarter of our economy, an important guide to how well or not the recovery is going. And the level of spending is back above where it was prior to the pandemic.
But it's not just about how much, but why and what we are spending on. Is it a case of can't or won't?
A drop in sales of clothing might reflect fewer people wanting or being able to browse on the High Street and put off by the inability to try on before you buy. If they think we are sitting on funds we can spend, measures like VAT cuts can give us the nudge to get out there and move the economy along.
But less spending on extra treats may also reflect lower incomes or nerves about job prospects. And that means we may need more support for saving and creating jobs - there are growing hints that we may hear more on that in the Budget
At this tricky time, a peek into the nation's shopping basket is more than just a nosy indulgence.
Entrepreneur and ex-Dragons' Den star Theo Paphitis told the BBC's Today programme: "It's really interesting as you see the confidence in the consumer in travelling outside their house. Our business outside the metropolitan areas... is remarkably stronger than it is within.
"It's the fact that people lose the confidence to go far outside their normal area of habitat," he said.
"It will never be the same again - I really can't see our stores ever reaching the levels in metropolitan areas that they did before, because I think the genie's out of the bottle."
Several High Street chains also announced job cuts in August as they battled to shore up their businesses during the pandemic.
Sandwich chain Pret A Manger announced it would cut 3,000 jobs, or more than a third of its workforce, while department store chains Debenhams and M&S said they would be cutting 2,500 and 7,000 jobs.
Lisa Hooker, consumer markets leader at PwC, said that the run-up to Christmas would be crucial for retailers.
"Retailers will be hoping that the fragile recovery is not derailed by more widespread lockdowns, rising unemployment or dented consumer confidence," she said.--BBC
Fed’s Bullard says ‘biggest growth quarter of all time’ will lift inflation
St. Louis Federal Reserve President James Bullard offered an optimistic look on the U.S. economy, with “off the charts” growth that will help lift inflation.
Bullard also said he sees the unemployment rate falling to 6.5% by the end of the year, an estimate well below the median projection of 7.6% that his Fed colleagues released earlier this week. Unemployment in August was 8.4%, down from the pandemic peak of 14.7%.
“This is the biggest growth quarter of all time in the U.S.,” he said Friday during a moderated discussion with the Boeing Center for Supply Chain Innovation. “It looks like 30% at an annual rate. Crazy number, way off the charts compared to anything we’re used to in U.S. post-war macroeconomic history.”
That growth, Bullard added, will help the Fed meet its 2% inflation mandate.
Following this week’s Federal Open Market Committee meeting, officials released a statement expressing their commitment to a goal that the central bank has missed since setting the target in 2012.
Under the initiative, the Fed has pledged not to raise rates until inflation has surpassed 2%, even if unemployment slides to a level normally associated with pricing pressures.
“I think this will be quite successful,” Bullard said. “I actually think we’re at a moment where you may see some inflation now in in the future from several sources.”
He cited “less preemptive policies from central banks” as well as the large government budget deficits often associated with inflation and the economy growing at a rate “that doesn’t happen every day.”
U.S. gross domestic product contracted at a 31.7% annualized pace in the second quarter, owing to the unprecedented economic shutdowns instituted to slow the coronavirus pandemic. The Atlanta Fed’s GDPNow tracker is showing the potential for a 32% growth rate in Q3.--cnbc
Unity Software has strong opening, gaining 31% after pricing above its raised range
Whoever said you can’t make money playing video games clearly hasn’t taken a look at Unity Software’s stock price.
On its first official day of trading, the company rose more than 31%, opening at $75 per share before closing the day at $68.35. Unity’s share price gains came after last night’s pricing of the company’s stock at $52 per share, well above the range of $44 to $48 which was itself an upward revision of the company’s initial target.
Games like “Pokémon GO” and “Iron Man VR” rely on the company’s software, as do untold numbers of other mobile gaming applications that use the company’s toolkit for support. The company’s customers range from small gaming publishers to large gaming giants like Electronic Arts, Niantic, Ubisoft and Tencent.
Unity’s IPO comes on the heels of other well-received debuts, including Sumo Logic, Snowflake and JFrog .
TechCrunch caught up with Unity’s CFO, Kim Jabal, after-hours today to dig in a bit on the transaction.
According to Jabal, hosting her company’s roadshow over Zoom had some advantages, as her team didn’t have to focus on tackling a single geography per day, allowing Unity to “optimize” its time based on who the company wanted to meet, instead, of say, whomever was free in Boston or Chicago on a particular Tuesday morning.
Jabal’s comments aren’t the first that TechCrunch has heard regarding roadshows going well in a digital format instead of as an in-person presentation. If the old-school roadshow survives, we’ll be surprised, though private jet companies will miss the business.
Talking about the transaction itself, Jabal stressed the connection between her company’s employees, value and their access to that same value. Unity’s IPO was unique in that existing and former employees were able to trade 15% of their vested holdings in the company on day one, excluding “current executive officers and directors,” per SEC filings.
That act does not seemed to have dampened enthusiasm for the company’s shares, and could have helped boost early float, allowing for the two sides of the supply and demand curves to more quickly meet close to the company’s real value, instead of a scarcity-driven, more artificial figure.
Regarding Unity’s IPO pricing, Jabal discussed what she called a “very data-driven process.” The result of that process was an IPO price that came in above its raised range, and still rose during its first day’s trading, but less than 50%. That’s about as good an outcome as you can hope for in an IPO.
One final thing for the SaaS nerds out there. Unity’s “dollar-based net expansion rate” went from very good to outstanding in 2020, or in the words of the S-1/A:
Our dollar-based net expansion rate, which measures expansion in existing customers’ revenue over a trailing 12-month period, grew from 124% as of December 31, 2018 to 133% as of December 31, 2019, and from 129% as of June 30, 2019 to 142% as of June 30, 2020, demonstrating the power of this strategy.
We had to ask. And the answer, per Jabal, was a combination of the company’s platform strength and how customers tend to use more of Unity’s services over time, which she described as growing with their customers. And the second key element was 2020’s unique dynamics that gave Unity a “tailwind” thanks to “increased usage, particularly in gaming.”
Looking at our own gaming levels in 2020 compared to 2019, that checks out.
This post closes the book on this week’s IPO class. Tired yet? Don’t be. Palantir is up next, and then Asana -techcrunch
Bitcoin-based artwork smashes records, sells for $100K
“Right Place & Right Time,” a digital art piece based on Bitcoin's (BTC) fluctuating price action, has sold for more than $100,000.
"The Master NFT of Right Place & Right Time was sold to TokenAngels for $101,593. — but happy to call it $100,000," Matt Kane, the artwork's creator, told Cointelegraph on Friday.
NFT stands for nonfungible token — a unique digital asset that does not synonymously value others like it. NFTs have begun surfacing as artwork, giving the tokenholder ownership over the art. "Right Place & Right Time" is an NFT art piece showing a creatively designed image of Bitcoin's logo. The patterns and overall look, however, change along with Bitcoin's price action.
Kane said he cannot remember when he actually began creating the art piece. "I've lost track of time in creating it," he said.
"My artwork always takes however much or little time that the work demands. The original digital painting was made last November and then I began preparing it to become a programmable artwork on Async Art in January. There's been countless tweaks and preparations to perfect it's homecoming to Volatility.art."
Many artists put their masterpieces on the blockchain via Async Art, while Volatility.art is a place viewers can see Bitcoin art formed from its daily price action.
"Right Place & Right Time" stands as a unique piece. The master NFT sold for $100,000. This master NFT, however, will create 210 different NFT artworks based on Bitcoin's price action and the subsequent patterns that pop up on the master art piece.
"Each NFT will be created by the original master NFT," Kane explained. "The compositions are created using an algorithm I wrote which visualize a single day in Bitcoin price volatility," he noted. "I'll maintain some creative influence, altering colors and other design elements as the project matures over time," he said, adding: "And of course I curate which days are minted."
When each of the 210 pieces are purchased, the master NFT owner receives 21% of each sale, Kane explained. "The purchasers of these 210 will [also] have the option to buy a print counterpart of their NFT art," Kane added.
The 210 and 21% numbers give tribute to the Bitcoin's maximum supply — 21 million coins.
The crypto and blockchain space has seen its art scene rise as of late, as a number of various art-related initiatives have popped up across the industry. -cointelegraph
Mobile banking startup Chime lands $485M mega-round at $14.5B valuation
Chime Financial Inc. today became the most valuable financial technology startup in the U.S. after announcing that it has closed a $485 million round at a $14.5 billion valuation.
The investment is the third raised by the startup in six months. Chime is now worth about nine times as much as it was in March, when a $200 million round led by DST Global first catapulted it into the unicorn club.
San Francisco-based Chime operates a popular consumer banking service that consumers can access via their mobile devices. The startup offers checking and savings accounts that do away most of the fees traditional banks charge for actions such as ATM withdrawals. Chime also doesn’t require a monthly subscription to use its service.
Instead, the startup generates most of its revenues by charging a small commission on transactions users make with their Chime-branded cards. The startup encourages customers to use their cards more often via an automated savings feature called Save When You Spend. The feature rounds out the value of transactions to the nearest dollar, then adds the round-up differentiate to the user’s Chime savings account.
Though fairly simple, the startup’s spin on online banking has enabled it to stand apart from the numerous other fintech players competing in this niche. Chime claimed to have had 3 million bank accounts when it closed its $200 million round in May and is now adding several hundred thousand new ones every month, Chief Executive Officer Chris Britt (pictured, left, with co-founder Ryan King) told CNBC today.
The extra $485 million in funding could make it easier for the startup to expand into new parts of the financial services market if it so chooses. Revolut Ltd., another mobile banking unicorn that raised capital recently, has built on the popularity of its core checking account features by adding value-added products such as stock trading tools and insurance. With the extra funding, Chime is also better positioned to expand geographically.
The startup is already growing fast enough as it is. In the CNBC interview, Britt said the company has more than tripled its revenue since the start of 2020 and generates positive earnings before interest, taxes, depreciation and amortization. The plan, the executive said, is to make the company “IPO-ready” within the next 12 months.
The $485 million round saw the participation of over half a dozen institutional backers including Iconiq Capital, Tiger Global and General Atlantic. To date, Chime has taken in about $1.5 billion from investors.-SiliconANGLE.
How South African companies are coping with recession
South African businesses have had to respond to the coronavirus and lockdown restrictions since March. At the same time, the country’s economy is in its longest recession in 28 years, with millions reported to have lost their jobs due to the pandemic.
Here’s how companies in key industries have coped with the unprecedented crisis:
Banks
South Africa’s biggest lenders were faced with the pressing need to raise provisions to protect against souring loans, while demand for credit slumped as the coronavirus lockdown took a toll on business customers.
While Standard Bank Group Ltd and Absa Group Ltd boosted profits for the six months through June when provisions are excluded, Nedbank Group Ltd failed to grow earnings by the same measure. FirstRand Ltd, reporting for the full year, also said profit fell before provisions.
Now banks must wait and see whether they have adequately prepared for future bad debts. South African regulators have encouraged the withholding of dividend payments amid uncertainty about the economic fallout from the pandemic.
Retailers
South African retailers can be roughly split between those that were allowed to trade during the country’s strictest lockdown phase and those that weren’t.
Supermarket giant Shoprite Holdings Ltd was one of the big winners, tightening its grip on the local food market and even raising the dividend. Yet Edcon Holdings Ltd. said within days it may not be able to re-open its clothing stores after the shutdown.
The owner of the Edgars and Jet chains filed for bankruptcy protection in April, with parts later sold off to other operators.
Walmart Inc’s South African unit was in the middle of a turnaround plan when the lockdown started, yet Massmart Holdings Ltd boosted gross margins and, crucially, could lean on its parent for cash.
Pepkor Holdings Ltd, a low-cost clothing specialist, has taken advantage of those looking for discounts in the tough post-lockdown environment after fully reopening in June.
“If you are in anything beyond food, you have a higher risk business,” Shoprite chief executive officer Pieter Engelbrecht said in an interview. “The terrible fear on our side is job security.
A lot is going to be determined by how many people are going to lose their jobs and the government’s plan to plug that hole.”
Miners
Mining companies have been buoyed by a rally in the price of gold and platinum-group metals that’s helped offset operational disruptions caused by South Africa’s lockdown to contain the pandemic.
Sibanye Stillwater Ltd. restored dividend payments for the first time in three years while Anglo American Platinum Ltd, said it’s maintaining its payout ratio despite lower output.
Impala Platinum Holdings Ltd paid its highest dividend in nine years with chief executive officer Nico Muller promising more to come.
“We believe the strong metal prices will prevail,” the CEO said. “We have all the belief in the world the dividend will continue to grow from strength to strength.”
The flipside has been the challenge of returning hundreds of thousands of people to work in South Africa’s mines at a time when Covid-19 infections were surging, causing a string of local outbreaks.
Platinum producers also suffered from a slump in global demand as automakers halted operations, though China has returned to pre-Covid-19 levels and there’s been no need as yet for job cuts.
Telecommunications
The pandemic brought some benefits for wireless carriers Vodacom Group Ltd and MTN Group Ltd as the government released broadband spectrum for the first time in fifteen years. This was to deal with a large surge in voice and data traffic as people were forced to work and entertain themselves from home.
The additional spectrum also enabled the two largest operators in the country to start building commercial 5G networks.
“Telecom companies have been relative winners in that network traffic — data in particular — has grown, supporting revenue growth,” said Bloomberg Intelligence analyst John Davies. “The longer term may bring headwinds from depressed economies and rising unemployment.”
In light of that uncertainty, MTN opted not to pay an interim dividend.
Leisure
Tourism and lifestyle companies have struggled to navigate a lockdown policy that prohibited leisure travel and saw gyms as danger spots.
Brait SE’s Virgin Active fitness chain has only recently reopened and a planned sale of the chain will be delayed as much as 18 months.
Distell Group Holdings Ltd, South Africa’s biggest maker of wine and spirits, was hit by two bans on alcohol sales and reported a 23% slump in earnings in the year through June.
Sun International Holdings Ltd, a hotel and casino operator that owns the famous Sun City resort, was hurt by the alcohol and travel restrictions even after being allowed to reopen and plans to cut 2,300 jobs. But a swift recovery isn’t impossible, according to chief executive officer Anthony Leeming.
“We are quite positive and July was positive and August stronger,” he said.
“This business will recover and tourism will recover. Travel is something that most people with financial means want to do. It’s just a matter of time.”-businesstech
Global stocks fall
TOKYO.- Stocks fell and the dollar advanced on yesterday after the Federal Reserve pledged to keep interest rates low for a long time but stopped short of offering further stimulus to shore up a battered US economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.01 percent, running out of steam after five straight days of gains. Japan’s Nikkei shed 0,63 percent.
US S&P 500 futures fell 1,03 percent in Asia on Thursday following a 0,46 percent drop in the S&P 500 on Wall Street.
Tech shares fared worse, with the Nasdaq Composite dropping 1,25 percent on Wednesday. Nasdaq futures fell 1,14 percent in Asia.
“In essence, high-tech shares were overbought and we’ve seen a correction since early this month,” said Soichiro Monji, chief strategist at Nishimura Securities in Kyoto.
“I think that is still continuing, with the Fed just being a fresh trigger.”
The Fed said it would keep interest rates near zero until inflation is on track to “moderately exceed” the central bank’s 2 percent inflation target “for some time.”
New economic projections released with the policy statement showed most policymakers see interest rates on hold through to at least 2023, with inflation not breaching 2 percent over that period.
“Of course, sensible people wouldn’t really hold anyone to macro forecasts that far out so we’ll cross that bridge when we get to it,” said Derek Holt, head of capital markets economics at Scotiabank in Toronto.
“Nevertheless, markets are priced for basically one outcome here and that is little inflation and no hikes for years to come.”
Still, with such expectations considered a foregone conclusion by many investors, there was some disappointment in the market.
“By and large the Fed delivered the minimum of what had been expected by markets with a key focus on the implications of a move to ‘flexible’ inflation targeting,” said Stephen Miller, investment strategist at GSFM in Sydney.
The 10-year US Treasuries yielded 0,677 percent, a few basis points above its levels before the Fed. The US dollar gained against most other currencies. The euro dropped 0,4 percent to US$1,1767 while the Australian dollar lost 0,4 percent to $0,7278, having erased earlier gains made after stronger-than-expected local jobs data.
The Chinese yuan also dropped about 0,35 percent to 6,7686 per dollar, stepping back from a 16-month high hit on Wednesday.
The yen was little moved at 104,98 to the dollar having hit a 1-1/2-month high of 104,80 per dollar overnight.
With focus on new Prime Minister Yoshihide Suga, who is seen by some as a strong opponent of a higher yen, some traders said the market may be tempted to test his resolve on the currency.
“One interesting speculative trade in the near-term will be to long the yen ahead of the coming long weekend in Japan,” said a senior trading manager at a major Japanese bank.
The Bank of Japan maintained its policy as widely expected.
As the dollar gains, oil prices gave up some of their big gains made on Wednesday on a drawdown in US crude and gasoline inventories, with Hurricane Sally forcing a swath of US offshore production to shut.
Brent crude dropped 0,99 percent to US$41,80 per barrel while US crude fell 1,2 percent to US$39,68 per barrel.
Gold also slipped 0,8 percent to US$1 943,8 per ounce. – Reuters.
SA retails sales contract
Retail sales in South Africa disappointed in July, backtracking on some of the ground recovered in the previous month, and underscoring the long road to recovery lying ahead for the sector.
Retail sales contracted 9 percent year on year in July, worse that the minus 5 percent expected in a Bloomberg poll of eight economists, and a sharper contraction than the revised 7,2 percent fall reported in June. The figures come as consumer confidence is at its lowest levels since 1993, despite a partial recovery off the historic trough recorded in the second quarter, and highlighting the stresses households still face as they navigate the fallout from the Covid-19 lockdown.
“I think it’s quite reflective of weak consumer sentiment in SA,” said Sanisha Packirisamy, economist at Momentum Investments, adding that the drivers that typically support consumer spending, including income levels, employment and confidence, all face headwinds.
“Income levels are generally down, anecdotally we know there have been significant pay cuts in areas of the economy,” she told Business Day.
The most recent data from the BankservAfrica take-home pay index, for the month of June, suggested a 20,7 percent decline in monthly payments from a year ago. — Businessday.com
China EU top trading partner
In the first seven months of 2020, China became the top trading partner of the European Union (EU), a position previously held by the United States, said Eurostat on Wednesday.
EU’s imports from China increased by 4,9 percent in the January-July period, compared to the same period last year, whereas its imports from the US dropped by 11,7 percent.
The bloc’s exports to China recorded a slight drop of 1.8 percent, while those to the US fell by 9,9 percent, according to the EU’s statistical office.
China and US were followed by the United Kingdom, Switzerland, and Russia on EU’s main trading partner list in the first seven months.
In accordance with the world’s changing epidemiological situation during the first seven months, the EU’s international trade started to fall in January, and regained momentum after May, when confinement measures were gradually eased.
In July, EU exports out of the bloc stood at €168,5 billion, down by 11,3 percent compared to July 2019, and its imports from the rest of the world reached €142,6 billion, down by 16 percent year-on-year, according to Eurostat estimates. — Xinhua.
Failed tests cripple UK economy
Business leaders have warned that major shortcomings in the UK’s coronavirus testing regime are threatening to “cripple” the economy, as they also urged ministers to “get a grip” of the situation.
The test and trace system has been overwhelmed by a surge in demand since the reopening of schools in England and a push by ministers to persuade more employees to go back to the workplace.
There have been widespread reports of people struggling to obtain tests in recent days, and some people in England now face substantial delays in securing them as the government prioritises those most in need.
Business leaders are worried about the risk of a second national lockdown if the test and trace system is unable to pinpoint local outbreaks of Covid-19. Adam Marshall, director-general of the British Chambers of Commerce, called on the government to improve the testing regime “immediately” to ensure it could help all those who need it. A truly comprehensive test and trace programme is essential if the UK is to manage the virus without further lockdowns which will cripple businesses,” he said.
“Continuing delays and a shortage of tests saps business, staff and consumer confidence at a fragile moment for the economy.”
Business leaders are concerned that more workers will be forced to self-isolate at home while either they or their families are trying to secure tests, or waiting for results. The Financial Times reported on Wednesday that at the start of September, before schools reopened, 63 percent of people in England who tested positive received their results by the end of the day after they had provided a swab. But by Tuesday that figure had dropped to just 8 percent, according to data from the government’s Covid-19 dashboard. — Financialtimes.
Coca-Cola bottlers feeling flat
Martin Williams’ great-grandfather founded their Coca-Cola distribution business in Corinth, Mississippi, in 1907, just a handful of years after Coke was first sold in bottles across the United States.
He’s part of the fourth generation to run it, and he’s determined not to be the last.
Williams’ business is one of nearly 70 US Coca-Cola “bottlers” – third-party, independent companies that put Coke and other beverages into cans and bottles and deliver the drinks to retailers and restaurants in every corner of the country.
The future of such companies is not only critical for their owners and employees, but also key for their main supplier — Coca-Cola, the world’s No.1 soft drink maker — which needs them to flourish to help it recover from a slump in sales.
But Covid-19 has upended their business models.
“It was chaos. You just had no idea what the world was going through and what we were up against,” said Williams, the finance head of his family’s firm. “It’s on our shoulders to try to take our business forward into the future and to maintain the work that our ancestors have done.”
Shoppers in lockdowns snapped up cases of Coke, Fanta and Sprite at grocery stores rather than at gas stations, restaurants and stadiums. That left bottlers scrambling to keep stores stocked with bigger, often less-profitable packages. Lucrative sales to restaurants and convenience stores are still only a fraction of what they were before the pandemic hit the United States.
The bottlers — now saddled with too much product meant for restaurants — have also been hit by a shortage of aluminium cans due to a surge in demand for canned drinks as people stay home.
Williams, whose business distributes rather than makes drinks, has adapted to this new order over the last six months, while grappling with higher costs for fuel, transportation, labour, safety gear and cleaning products. Pressures have eased since the lockdown, but his firm is still affected.
coca-cola mass layoffs
Coca-Cola sells syrups, powders and base ingredients — known as concentrates — to bottlers, who mix, package and sell drinks
to retailers, giving a cut back to the soda giant.
The company works with many large publicly listed bottlers around the world, including in Europe and Asia. But many U.S. players are small, family-owned businesses, with limited reserves to draw from as sales and profits shrink.
About two-thirds of them received pandemic aid from the US government to keep in hand or stay afloat, which is important for Coca-Cola to increase its own sales.
All the while Coca-Cola, with whom they have a symbiotic relationship, has also been under intense pressure.
The drinks giant’s volume sales in North America declined 16 percent in the latest quarter.
Nearly 40 percent of its over 10 000 employees in the region will decide by Thursday whether to volunteer for severance as part of a sweeping restructuring.
“It was a very difficult time throughout April and May, in particular, and our bottlers have to deal with that on a regular basis,” Chaly Moyen, Coca-Cola’s North America head of strategy, told Reuters.
‘‘As lockdowns have eased, worldwide volume declines have moderated, from about 25 percent in April to about 10 percent in June.
She declined to say whether Coca-Cola would bail out any bottlers close to going bankrupt.
New business realities
Coca-Cola is the US leader in fizzy drinks — excluding tea, water and energy drinks — with about 38 percent of the US$41,8 billion retail market, followed by PepsiCo and Keurig Dr Pepper, according to Euromonitor.
While the food-service sales that make up about half of Coca-Cola’s business have dived, Moyen said North American sales to large stores have risen.
At the height of the pandemic, they were up by a double-digit percentage versus a year earlier, and remain up by double-digits for 2020 so far, she added.
However she acknowledged bottlers and distributors had been hit hard by the shifting retail landscape.
“The impact that bottlers had from a mix shift was real,” Moyen said, adding that Coca-Cola expected the new consumer habits to stick.
Selling less product has hurt; in the quarter ended June 26, Coca-Cola sold 22 percent less concentrates worldwide as demand fell. Some bottlers have been forced to lay off or reassign workers specialising in supplying restaurants to bottling and distributing retail-friendly products, tasks in which they are not experienced, driving down productivity.
Reyes Holdings, Coca-Cola’s second-biggest US bottler, told Reuters it laid off 30 people — or about 6 percent of staff – at its Alsip facility in Illinois in April. As things improved, it reinstated half of those workers.
Coca-Cola Consolidated, the biggest U.S. Coke bottler — last month reported a 3,6 percent fall in quarterly net sales. But the company, whose No.1 shareholder is Coca-Cola, increased adjusted operating income by 5,4 percent, after furloughing about 700 people without pay.
Duane Stanford, publisher of the Beverage Digest newsletter, said such moves simply reflected the new business realities.
“In this kind of environment it’s important to control costs — that absolutely comes with cutting jobs.” — Reuters.
Why young people can’t find work in South Africa: minister
Government has identified a number of challenges that continue to contribute to the high unemployment rate amongst the youth in South Africa.
Responding in a recent written parliamentary Q&A session, Employment and Labour minister Thulas Nxesi, said that key issues include:
The structural nature of the South African economy;
Low economic growth levels compounded by insufficient investments by the private and public sector in new ventures and infrastructure;
Socio-economic challenges and the high poverty levels that remain amongst blacks and in some instances contributing to school dropouts especially in peri-urban and rural areas;
Limited skill acquisition and resultant inadequate preparation of youth for entry into the world of work;
Rapid changes in the labour market fuelled by digitisation and automation.
Nxesi said that the Covid-19 pandemic has further added to the above challenges.
“Within government, great strides have been made in improving employability of young people through interventions in the education system but more still needs to be done. Government has also implemented a number of interventions to address the youth unemployment problem,” he said.
Some of the initiatives that have been introduced Department of Employment and Labour include;
The Promulgation of the Employment Services Act 2014 was introduced to guide the Department in its free services to promote youth employment. These services include registration of work seekers and employment opportunities, the matching, counselling, placement offered through 126 Labour centres, satellite and visiting points; and vulnerable groups employment schemes through 13 Supported Employment Enterprises Factories and Subsidised organisations that employ people with disabilities;
Labour Activation programmes funded by the Unemployment Insurance Fund;
Occupational death dependants Youth bursary scheme funded by the Compensation Fund.
Unemployment in South Africa
The latest Quarterly Labour Force Survey for the three months to March 2020, revealed that the country’s unemployment rate rose by one percentage point to 30.1% in Q1 of 2020.
This data does not include the coronavirus lockdown period and the country’s unemployment rate is expected to have risen significantly in Q2 2020.
The number of employed persons decreased by 38,000 to 16.4 million and the number of unemployed persons increased by 344,000 to 7.1 million in Q1: 2020 compared to Q4: 2019, resulting in an increase of 306,000 in the labour force.
The percentage of young persons aged 15 – 24 years who were not in employment, education or training (NEET) increased from 33.2% in Q1: 2019 to 34.1% in Q1: 2020.
In this age group, the NEET rate for both males and females increased by 0.8 of a percentage point. The NEET rate for females was higher than that of their male counterparts in both years.
Compared to Q1 2019, the percentage of young persons aged 15-34 years who were not NEET increased by 1.1 percentage points from 40.7% to 41.7% in Q1 2020.
The NEET rate for males increased by one percentage point while for females, the rate increased by 1.1 percentage points in Q1 2020. In both Q1 2019 and Q1: 2020, more than four in every ten young females were not in employment, education or training.-businesstech
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