Major International Business Headlines Brief::: 19 June 2021

Sat Jun 19 08:46:42 CAT 2021

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Major International Business Headlines Brief::: 19 June 2021

 <https://www.nedbank.co.zw/> 

ü  Coronavirus: Setback for EU in legal fight with AstraZeneca

ü  TikTok owner ByteDance sees its earnings double in 2020

ü  UK food and drink exports to the EU almost halve in first quarter

ü  Victoria’s Secret mulls return of new look show

ü  US Supreme Court blocks child slavery lawsuit against chocolate firms

ü  Retail sales fall in May as shoppers dine out

ü  Cryptoassets: Fears that investors are taking too many risks

ü  Major Australian banks hit by website outage

ü  Scotch whisky tariffs suspended in UK-US trade deal

ü  Wall St Week Ahead: Fed shift causes rally in value stocks to wobble

ü  EXCLUSIVE Fed’s Kashkari opposed to rate hikes at least through 2023

ü  Investors brace for annual Russell index rebalancing with pandemic imprint

ü  Bitcoin falls 7% to $35,431.15

ü  EXCLUSIVE Google’s adtech business set to face formal EU probe by year-end -sources

ü  Former U.S. Ambassador throws support behind embattled Toshiba board chair

ü  Exxon, union try new approach to resolve increasingly bitter dispute

ü  Ex-Tesla president sold stocks worth $247 million since June 10-SEC filing

 <mailto:info at bulls.co.zw> 

Coronavirus: Setback for EU in legal fight with AstraZeneca

The EU has lost a legal battle in Brussels to force Anglo-Swedish drug maker AstraZeneca to supply 120m doses of Covid-19 vaccine by the end of June.

It went to court last month after the company delayed shipment of the vital vaccines, having originally committed to supply 300m doses by the same date.

However, the EU demand was not satisfied by the judge in Brussels.

But the judge did impose a deadline on AstraZeneca to supply doses to the EU over the summer or face hefty fines.

Both the EU and the pharmaceutical company talked up Friday's court order, with Brussels saying it confirmed its position and AstraZeneca saying it welcomed the outcome.

The two-dose Oxford-AstraZeneca jab is one of the big three vaccines, along with those developed by Pfizer-BioNTech and Moderna, and has by far the greatest global reach.

What exactly did the judge order?

The judge at the Court of First Instance in Brussels ordered that AstraZeneca should deliver a total of 80.2m doses by 27 September.

If the company fails to do so, the order says, it must pay a penalty of €10 (£8.5; $12) per dose not delivered.

The EU's demand for 120m doses by the end of this month was not accepted.

Welcoming the court order, AstraZeneca said it had already supplied more than 70m doses to the EU and would "substantially exceed" 80.2m doses by the end of June.

It noted that the order acknowledged that "the difficulties experienced by AstraZeneca in this unprecedented situation" had had a "substantial impact on the delay" of vaccine deliveries.

"AstraZeneca now looks forward to renewed collaboration with the European Commission to help combat the pandemic in Europe," it added.

The President of the European Commission, Ursula von der Leyen, also welcomed the order but said it confirmed the Commission's view that AstraZeneca had not lived "up to the commitments it made in the contract".

"It is good to see that an independent judge confirms this," she said. "This shows that our European vaccination campaign not only delivers for our citizens day by day. It also demonstrates, that it was founded on a sound legal basis."

What else do the two sides disagree on?

A lawyer representing the EU said the court order meant AstraZeneca must also use a British factory, Oxford Biomedica, to deliver Covid-19 vaccines to the EU if necessary. The factory has been used to supply the vaccine to the UK.

Among other things, the court order says: "The choice to monopolise the Oxford site for the benefit of the UK and in so doing to deprive the EU of an expressly foreseen production site seems even more prejudicial considering its production capacity is twice that of other sites."

But AstraZeneca says the legal judgement does not oblige the company to use the Oxford BioMedica plant to fulfil its contract with the EU.

A further court ruling is expected in September on whether AstraZeneca made its best efforts to fulfil its advance purchase agreement with the EU.

The original June target of 300m doses was agreed in negotiations last summer but was then cut by AstraZeneca to 100m because of production problems and export restrictions. That reduction prompted the EU to make its demand for 120m doses.--BBC

TikTok owner ByteDance sees its earnings double in 2020

ByteDance, the Chinese company behind the smash-hit video app TikTok, saw its earnings double last year.

An internal memo released to staff showed that the firm's total revenue jumped by 111% to $34.3bn (£24.7bn) for 2020.

The figures underscore TikTok's continued global popularity.

It comes as ByteDance and several other Chinese technology giants have come under increasing pressure from governments around the world.

ByteDance also saw its annual gross profit rise by 93% to to $19bn, while it recorded a net loss of $45bn for the same period.

The net loss was attributed to a one-off accounting adjustment and not related to the company's operations.

The memo also showed that ByteDance had around 1.9bn monthly active users across all of its platforms as of December last year.

A ByteDance spokesperson confirmed the figures to the BBC.

White House pressure

The massive popularity of TikTok has meant that ByteDance has been scrutinised by governments around the world, including in the US and China.

On Thursday, Reuters reported that an executive order signed by President Joe Biden earlier this month would force some Chinese apps to take tougher measures to protect user data if they wanted to stay in the US market.

It came after President Biden revoked an executive order from his predecessor Donald Trump that banned Chinese apps TikTok and WeChat in the US.

The ban faced a series of legal challenges and never came into force.

Instead, the US Department of Commerce said it would review apps designed and developed by those in "the jurisdiction of a foreign adversary", such as China.

It should use an "evidence-based approach" to see if they pose a risk to US national security, President Biden said.

During the previous administration, President Trump regularly attacked ByteDance, accusing TikTok of being a threat to US national security.

Politicians and officials raised concerns about users' personal data being passed to the Chinese government.

TikTok has denied accusations that it shared user data with Beijing.

Beijing scrutiny

In April, Chinese regulators called on 13 online platforms, including ByteDance, to adhere to tighter regulations in their financial divisions.

It came as part of a wider push to rein in the country's technology giants.

The authorities said the aim was to prevent monopolistic behaviour and the "disorderly expansion of capital".

For many years, Beijing had taken a hands off approach to encourage the technology industry to grow.

Company shake-up

In May, ByteDance announced that the company's CEO and co-founder Zhang Yiming would step down and transition to a new role by the end of the year.

In a letter to employees, Mr Zhang said he would be succeeded by fellow co-founder Rubo Liang.

"The truth is, I lack some of the skills that make an ideal manager. I'm more interested in analysing organizational and market principles, and leveraging these theories to further reduce management work, rather than actually managing people," Mr Zhang wrote in a message on the company's website.

"Similarly, I'm not very social, preferring solitary activities like being online, reading, listening to music, and contemplating what may be possible," he added.

The move marked the biggest shake-up at the Chinese technology giant since its launch almost a decade ago.-BBC

UK food and drink exports to the EU almost halve in first quarter

UK food and drink exports to the European Union almost halved in the first three months of the year, compared with the same period in 2020.

The Food and Drink Federation (FDF) figures show EU sales dropped by 47%.

The trade body said the decline was largely due to changes in the UK's trading relationships, but said the pandemic was also a factor.

The government said it was "too early to draw any firm conclusions" on the long term impact of Brexit.

Chart showing food and drink exports at 10-year low

It also said the pandemic had depressed demand.

"The most recent ONS trade statistics show that for both March and April, overall exports to the EU have exceeded the average levels across 2020," a government spokesperson added.

Rachel Hicks, co-founder and co-distiller at Sky Wave Gin said the "red tape is strangling" her business. She said that EU sales "utterly dropped off a cliff" in the first quarter, meaning her turnover was down 30%.

"The real shame is somewhere like Asia - a fast growing region for gin - is going to potentially snaffle all the markets," Ms Hicks said.

"We are now unable to quickly send gin to our customers all over Europe and have to wait for HMRC to inspect us every time we send gin abroad."

Graham Flannigan from Berwick Shellfish in Northumberland, is in a similar position. He said his seafood exports had "come down drastically" mainly due to Brexit and the impact of lockdowns.

"The logistics systems are moving better now but it's the red tape that is having to be built into the cost of the goods and this is having a knock on effect," he added.

Cheese sales hardest hit

Dominic Goudie, the FDF's head of international trade, said the drop in exports his federation had recorded was a "disaster" for the industry.

"It is a very clear indication of the scale of losses that UK manufacturers face in the longer-term due to new trade barriers with the EU."

New trade barriers were not the only factor affecting cross channel trade. The FDF said that the Covid-19 outbreak accounted for a decline of some 10-15%.

Figures for the quarter were also affected by companies stockpiling ahead of the Brexit-related changes.

The combination of these factors, the FDF says, led to significant falls in the value of leading exports.

Compared with the first quarter of 2019 - before Covid became a factor - exports of cheese were down 72%; fish sales were down 52% and chocolate was down 37%.

Chart showing falls in exports of food product

Exports of food and drink to nearly all EU nations fell significantly in the first quarter, compared with the same period last year.

Worst hit was trade with Ireland - normally the sector's biggest overseas market. It was down by more than 70%. But sales to Germany, Spain and Italy also more than halved.

For decades, the UK has sold more food and drink to the European Union than to the rest of the world combined.

However, the fall in shipments to Europe means that is no longer the case. In the first quarter exports to non-EU nations made up 55% of the total.

The FDF said this is the first time this has happened in at least 20 years.

Chart showing trade with Ireland has fallen by more than 70%

Overall, sales to non-EU countries rose by 0.3% - although there was a significant increase in shipments to China.

Sales to the region, which fell in the first quarter of last year due to Covid-related lockdowns, recovered to reach £200m - well above their pre-pandemic level of £163m.

New rules

On 31 December, the so-called 'implementation period', in place since Britain left the EU, came to an end.

That meant trade across the channel became subject to new post-Brexit regulations and customs formalities for the first time.

This FDF says this has had a particularly significant impact on the trade in products of animal origin and other perishable foods, because it led to significant delays while formalities were completed.

"Trade that would take 12 hours in the past can now take a day or even a week," said Mr Goudie.

"If you lose two days or even three days it takes a big chunk out of the of shelf life of the product, which makes the trade itself less viable."-BBC

Victoria’s Secret mulls return of new look show

Victoria's Secret is considering bringing back a "re-imagined" version of its runway show as the lingerie giant embarks on a "dramatic shift" for the brand.

The annual event was scrapped in 2019 amid a wider cultural move away from its hyper-sexualised imagery.

It comes as Victoria's Secret announced it had hired a line-up of new faces to promote the brand.

They include football star Megan Rapinoe and Priyanka Chopra Jonas.

Ms Rapinoe and Ms Chopra Jonas, an actress and producer. will form part of "The VS Collective" a group of women who will work with the company on "collaborations, business partnerships and cause-related initiatives".

Victoria's Secret was long famous for its annual fashion show where statuesque, supermodel "Angels" would strut the catwalk in little more than lingerie, feathers and gems.

The company still generates billions of dollars in sales.

However, a cultural shift around the #metoo movement and body positivity saw rival companies such as Savage X Fenty - the underwear brand founded by singer and make-up mogul Rihanna - grow in popularity. More women were also choosing to buy comfortable, "althleisure" inspired underwear.

Victoria's Secret held its last show in 2018 before confirming its cancellation the following year as viewing figures fell to 3.3 million.

A spokesperson for Victoria's Secret said: "As an entertainment brand, with a huge cultural footprint we are reimagining what a fashion show could look like for us in the future."

The company announced The VS Collective - which it described as "a dramatic shift for our brand" - as it prepares to cut ties with its parent company L Brands in a spin-off later this year.

'Patriarchal, sexist'

Martin Waters, Victoria's Secret chief executive - the fourth appointed in five years - told The New York Times that "right now" he did not see the Angels as being "culturally relevant".

Ms Rapinoe, an LGBTQIA+ activist, was more blunt in her assessment of the company's past image, describing it as "patriarchal, sexist, viewing not just what it meant to be sexy but what the clothes were trying to accomplish through a male lens and through what men desired".

She added that it was "very much marketed toward younger women", a message which she said was "really harmful."

The Victoria's Secret show was the brainchild of L Brands' former chief marketing officer Ed Razek who resigned from the firm in 2019. The previous year he had come under fire for making a transphobic remark. He also said audiences had no interest in seeing plus-size models.

Valentina Sampaio, an LGBTQIA+ activist who became Victoria's Secret's first openly transgender model two years ago just before Mr Razek resigned, has also joined the firm's "collective" alongside plus-sized model and "body advocate" Paloma Elsesser.

Victoria's Secret was bought by billionaire Les Wexner in 1982. Mr Wexner, the former chief executive of L Brands, recently announced that he would not stand for re-election as chairman emeritus.

In 2019, Mr Wexner came under fire for his long friendship with the late sex offender Jeffrey Epstein. He employed Mr Epstein to manage his finances but cut ties with him in 2007. Mr Wexner said he was "embarrassed" by his friendship with Mr Epstein.

Commenting on why Victoria's Secret was launching the new partnership now, Mr Waters told The New York Times: "I've known that we needed to change this brand for a long time, we just haven't had the control of the company to be able to do it."

Mr Waters joined L Brands in 2008, overseeing its international division, before taking over as Victoria's Secret's new boss in November last year.-BBC

US Supreme Court blocks child slavery lawsuit against chocolate firms

The US Supreme Court has ruled food giants Nestlé USA and Cargill can't be sued for child slavery on African farms from where they buy their cocoa.

Six African men alleged that they were trafficked from Mali and forced to work on cocoa farms in Ivory Coast.

The group say both companies perpetuated that slave trade to keep cocoa prices low.

The court ruled 8-1 that the group had no standing because the abuse happened outside the US.

But it stopped short of a definitive ruling on whether the Alien Tort Act - an 18th century law - could be used to hold US companies to account for labour abuses committed in their supply chains abroad.

About 70% of the world's cocoa is produced in West Africa, and much of this is exported to America.

It's estimated that 1.56m children work on cocoa farms in Ivory Coast and Ghana, according to a report published by the US Department of Labor last year.

In their lawsuit, the group of men alleged that they were forced to work on the cocoa farms for 12-14 hours a day. They also said they were kept under armed guard while they slept, in order to prevent them from escaping, and were paid little beyond basic food.

While decrying child slavery, the companies argued the case should instead be made against the traffickers and the farmers who kept them in such conditions.

In its decision, written by Justice Clarence Thomas, the court ruled that while Nestlé USA and Cargill provided the farms with technical and financial resources, there was no evidence that business decisions made in the US led to the men's forced labour.

To activists who have fought chocolate firms for years, the ruling came as a blow.

"They decided on the budgets, they decided on the planning, on the business aspects - all those things were done from the US," said Terry Collingsworth, executive director of International Rights Advocates, speaking to Fortune Magazine.

Mr Collingsworth said his legal team would file a new lawsuit, alleging that many decisions made by Nestlé and Cargill in the US helped to pave the way for the use of child slaves in Ivory Coast.

In a statement, Nestlé USA said it had never engaged in child labour and remained "unwavering in [its] dedication to combating child labour in the cocoa industry".-BBC

Retail sales fall in May as shoppers dine out

Retail sales fell by 1.4% between April and May as people chose to visit reopened bars and restaurants instead of buying food at supermarkets.

The Office for National Statistics said sales fell most significantly at food stores as consumers took advantage of Covid restrictions being lifted in the hospitality sector to eat out.

In contrast, sales at non-food shops rose on demand for outdoor furniture.

The proportion of online sales dipped as people returned to physical shops.

It is the third month in a row that the proportion of online sales has fallen, but the ONS said they "remain nearly 60% higher than the level seen in February 2020" before the pandemic.

Retail sales graphic

The ONS said that the volume of food sales dropped by 5.7% between April and May.

New figures from Tesco for the three months to 29 May appear to follow the trend. It said like-for-like sales grew strongly in March before "moderating" in April and May.

Tesco said that compared to the same period last year - when supermarkets experienced a rush in trade during the first lockdown - sales across the group rose by 1%.In the UK alone, trade rose by 0.5%.

Compared with the first quarter of 2019 before the pandemic, Tesco said sales were up by 8.1%.

Getting ready for summer

ONS data shows that sales at non-food shops grew by 2.3% between April and May although there were "contrasting pictures within the sector".

Shops selling households goods reported a sharp rise in sales with anecdotal evidence suggesting "increased spending on outdoor garden furniture in preparation for the summer and the relaxation of social gathering rules".

Toy and sports equipment retailers also saw a rise in trade.

Conversely, sales fell for both clothing and department stores, but the ONS said this followed strong growth in previous months and compared to May last year clothing shop sales rose 28.9% and department stores increased by 12.6%.

Paul Dales, chief UK economist at Capital Economics said that while the 1.4% fall in retail sales was "disappointing", he said it "may not mean that overall consumer spending is much weaker than we have been expecting if there was just a bigger shift in spending from the shops to the pubs as indoor hospitality reopened in mid-May".

We did more socialising and less shopping last month. Tesco only managed to eke out sales growth of 0.5% in the UK for its first quarter of the year. But the business has now started to come up against some tough comparisons with the start of the pandemic last year when supermarket sales went through the roof as shoppers stockpiled and the first lockdown began.

It's going to be hard going for all our supermarkets to deliver much growth this year given the stonking sales they enjoyed last year.

Tesco's boss, Ken Murphy, says customer behaviour is also starting to normalise with smaller shopping baskets and people making frequent trips to the aisles.

But Tesco's online sales remain strong with some 1.3 million orders being fulfilled every week. Like a number of other businesses, it's also experiencing a shortage in HGV drivers but Mr Murphy thinks this is something that Tesco can manage.

However, Pantheon Macroeconomics said more up-to-date data "tentatively suggest(s) that the recovery in households' spending is struggling to progress".

The Bank of England said that credit and debit card payments in the seven days to 10 June were 5% lower compared to February last year before the pandemic. This is worse than the 1.5% decline recorded in May when compared to February 2020.

It also said figures from restaurant reservation firm OpenTable indicated that "restaurant diner numbers peaked in the second half of May and subsequently have nearly returned to normal levels for the time of the year".

Pantheon's chief UK economist, Samuel Tombs, said: "We continue to think that the recovery in households' spending will lose momentum as it approaches its pre-Covid level later this year.

"Households' real disposable income looks set to fall in the fourth quarter, as the end of the furlough scheme reduces employment and inflation rises to match wage growth."-BBC

Cryptoassets: Fears that investors are taking too many risks

More people are investing in so-called cryptoassets and they are less likely to think they are taking a gamble, the City regulator suggests.

The research has prompted a fresh warning from the Financial Conduct Authority (FCA) that crypto investors risk losing the lot.

Some 14% of crypto buyers who were surveyed also said they had borrowed to invest, buoyed by reports of big gains.

One analyst described that statistic as "simply terrifying".

Gamble or not?

The FCA estimated that 2.3 million adults in the UK now held cryptoassets - the most common of which is cryptocurrency such as Bitcoin.

The eye-catching swings in price of these products have drawn in scores of investors, and led to a swathe of marketing.

The regulator also noted that whereas nearly half of investors (47%) last year considered their stake in cryptoassets as a gamble, that proportion had now dropped to 38%.

Just over half of those who have invested already were considering buying more, the research found.

World Bank rejects El Salvador Bitcoin request

The FCA warned that any problems with these investments were not covered by the usual safety nets as they were unregulated assets.

"If consumers invest in these types of products, they should be prepared to lose all their money," said Sheldon Mills, from the FCA.

Unlike with regulated investments, buyers would not get support from the Financial Ombudsman Service or the Financial Services Compensation Scheme if they were mis-sold crypto or the provider went bust.

Laith Khalaf, financial analyst at AJ Bell, said: "There is a dark underbelly lurking in the figures, which suggests there is still potential for widespread consumer harm.

"The fact that 14% of crypto buyers have borrowed to invest is simply terrifying. The extreme volatility and uncertain long-term outlook for crypto means holdings can be wiped out, leaving borrowers with nothing but their debt as a memento."-BBC

Major Australian banks hit by website outage

Several Australian banks and US airlines suffered website crashes on Thursday, following an issue with the web services company Akamai.

Customers reported problems with banks including ANZ, Westpac, St George, ME bank, Macquarie Bank, Allianz, and the Commonwealth Bank.

Banking apps were likewise unavailable.

The airlines affected suffered short outages. American Airlines, Southwest Airlines, United Airlines and Delta Air Lines were among them.

The disruption began at about 14:10 Sydney time (05:10 GMT). Australia Post, the postal service, was hit too - as well as Virgin Australia, the country's second-biggest carrier.

Akamai admitted it was the source of the problem, telling news agency AFP: "We are aware of the issue and actively working to restore services as soon as possible."

Akamai provides one of the world's largest content delivery networks (CDNs) - a service designed to speed up loading time for websites. Virgin said it used the technology for IT network authentication.

Earlier in June, an internal problem at another large CDN, Fastly, prompted an hour-long outage at a number of high-profile websites including Amazon, Reddit, and the UK government site.

At 16:15 local time, Commonwealth Bank tweeted that services were starting to return to normal and thanked customers for their patience.-BBC

Scotch whisky tariffs suspended in UK-US trade deal

The Scotch whisky industry has welcomed the suspension of US tariffs on its products after the UK and US resolved a long-running trade row over subsidies given to Airbus and Boeing.

The agreement will see retaliatory tariffs, imposed during the dispute, remain suspended for five years.

Those trade barriers were estimated to have lost the Scotch whisky industry more than £600m in exports.

The industry said it would now seek to rebuild exports to its largest market.

The agreement between the UK and US comes two days after the European Union also agreed a truce with the US to end their 17-year conflict over aircraft subsidies.

The Scotch whisky industry had been hit with a 25% tariff on single malt by the administration of former US President Donald Trump, after both countries imposed tariffs in the trade row.

Other UK industries including cashmere and construction vehicles were also affected.

Karen Betts, chief executive of the Scotch Whisky Association (SWA), said the deal was "very good news for Scotch whisky", after two "extremely damaging" years.

"What's critical now is that the governments and aerospace companies on both sides stick to their commitments and work with one another constructively," Ms Betts said.

Ms Betts said the SWA hoped tariffs on US whiskey coming into the UK and EU as a result of a separate dispute on steel and aluminium could be "resolved quickly".

Helen Brocklebank, chief executive of Walpole, which represents the likes of Alexander McQueen, Claridge's and Harrods, said it looked forward to the deal "resulting in the permanent removal of these punitive tariffs, which should never have been inflicted on the luxury sector".

The dispute between the US and EU has escalated over many years, with both sides accusing the other of unfairly propping up their flagship planemakers.

In 2019, the World Trade Organization ruled that the EU had illegally provided support to Airbus, clearing the way for the US to respond with tariffs worth up to $7.5bn (£5.4bn) in annual trade.

Roughly one year later, in a parallel case, it ruled that the US benefits to Boeing also violated trade rules, authorising the EU to hit the US with tariffs worth roughly $4bn.

Since then, both sides have taken steps to remove the assistance found at fault.

The US and the EU have taken a much more conciliatory stance in the 17-year dispute since President Biden took over from predecessor Donald Trump, who imposed tariffs on the EU.

UK officials hoped for compromise talks, casting the measure as an example of the benefits to the UK's ability to act as an independent trading nation following Brexit.

In March, the US dropped tariffs on UK cheese, cashmere, machinery and Scotch whisky, after the UK had dropped its own tariffs on some US goods in January.

The agreement comes as US President Joe Biden tries to bolster support for his more assertive stance towards Russia and China, and move away from Trump-era trade rows.

International Trade Secretary Liz Truss said the UK-US deal would support jobs across the UK and was "fantastic news for major employers like Scotch whisky and sectors like aerospace".

She added that it meant the UK could now focus on taking its "trading relationship with the US to the next level".

United States Trade Representative Katherine Tai said reaching an agreement with the UK was a "great step forward for our special relationship".

She said the deal was a "model we can build on" to ensure "fair competition and address common challenges from China and other non-market economies".

Both Boeing and Airbus welcomed the truce. Airbus previously said that the agreement "will provide the basis to create a level-playing field which we have advocated for since the start of this dispute".

SNP MP David Linden welcomed the removal of tariffs, but argued the UK government had dragged its feet on the issue.

He said Scotch whisky "should never have been caught in the crossfire" of the trade dispute.

This announcement of a five-year truce in the aircraft dispute means relief for those wanting to sell whisky, cashmere and Stilton across the Atlantic - but leaves bigger questions unanswered.

Attention in this row now switches to hammering out a permanent solution - and working together on what America see as a growing risk: whether China is playing fair as it strives for its economic goals.

But missing from today's announcement was any indication of when talks on a UK free-trade deal with America might resume.

Katharine Tai has been reviewing progress made by the Trump administration in the five rounds of talks so far. She says her approach is "worker-centric" - suggesting that if the process continues, America is likely to have some big demands in areas such as agriculture, which have yet to be tackled.

And it's a deal that the UK is keen to capture as it flexes its post-Brexit ambitions. About a sixth of Britain's trade is with America - more than 10 times as much as with Australia, with whom a deal was struck earlier in the week. But there's not much to suggest it's moved up America's to-do list.-BBC

Wall St Week Ahead: Fed shift causes rally in value stocks to wobble

(Reuters) - The Federal Reserve’s hawkish shift is forcing investors to reevaluate the rally in so-called value stocks, which have taken a hit in recent days after ripping higher for most of the year.

Shares of banks, energy firms and other companies that tend to be sensitive to the economy’s fluctuations have tumbled following the Federal Reserve’s meeting on Wednesday, when the central bank surprised investors by anticipating two quarter-percentage-point rate increases in 2023 amid a recent surge in inflation.

The Russell 1000 Value Stock Index (.RLV) is down 4% from its June peak, though still up 13.2% this year. Its growth counterpart (.RLV) is up 9.1% year-to-date.

One factor driving the move is the idea that a Fed more strongly focused on preventing the economy from overheating may begin unwinding easy-money policies sooner than previously expected. On Friday, St. Louis Federal Reserve President James Bullard said the central bank’s shift was a "natural" response to economic growth and inflation moving quicker than expected, bolstering that view.

“Value stocks had gotten ahead of themselves, particularly in energy and financials, and the folks that are caught offsides are starting to unwind those trades,” said Jamie Cox, managing partner at Harris Financial Group.

The post-Fed meeting slide in value has been accompanied by a retreat in some commodity prices, a surge in the dollar and a rally in U.S. government bonds that dragged down yields on the benchmark U.S. Treasury to around 1.44% on Friday afternoon. read more

Investors will be keeping a close eye on next week’s economic data for clues on whether the recent surge in inflation -- which saw consumer prices accelerate at their fastest pace in 12 years last month -- will persist.

New home sales and mortgage applications are due out June 23, while May consumer spending numbers are expected on June 25.

Investors piled into value stocks in the latter half of 2020, as signs of breakthroughs in vaccines against COVID-19 bolstered the case for a powerful economic rebound in 2021. Value stocks have outperformed growth stocks by nearly 7 percentage points since the start of November 2020, bucking a trend that saw technology and other growth sectors regularly outshine value over the last decade.

An unwinding of the heavy positioning in value shares could exacerbate the recent slide. Mutual funds are overweight value names to a larger degree than any time in the last eight years, according to a Goldman Sachs report published on June 9.

Some big-name investors such as Cathie Wood, whose ARK Innovation ETF was the top-performing U.S. equity fund last year, have suggested that growth stocks will resume their market outperformance as investors rotate away from value sectors such as energy that are up 38.5% since the start of the year. L2N2NQ273 Wood’s flagship ETF is down 4.8% year-to-date.

Others, however, believe the recent wobble in value stocks is a pause, rather than a turning point.

Cyclical companies remain the least over-valued in the U.S. stock market, according to Jonathan Golub, chief U.S. equity strategist at Credit Suisse. High sales-growth companies are trading at valuations nearly double their 10-year averages, while cyclical companies are trading at valuations approximately 40% more than their historical levels, he wrote in a research note.

The prospect of rising interest rates should also benefit higher quality value stock names that held up better in last year's downturn but have lagged during the recovery, said John Mowrey, chief investment officer at NFJ Investment Group.

He has been increasing his positions in utility and consumer staples stocks that have underperformed value stocks as a whole, betting that they will increase their dividend payouts, which would make them more attractive even if Treasury yields eventually rise.

Among his holdings are consumer companies Church & Dwight Co (CHD.N), which is down 4% for the year to date, and McCormick & Company Inc (MKC.N), which is down 9.7% for the year to date.

"The idea of dividend growth has been largely sidelined because we’ve all been enjoying stock appreciation," he said. "We think this will be the next leg of the value stock rally."

Our Standards: The Thomson Reuters Trust Principles.

EXCLUSIVE Fed’s Kashkari opposed to rate hikes at least through 2023

(Reuters) - Minneapolis Federal Reserve President Neel Kashkari said on Friday he wants to keep the U.S. central bank’s benchmark short-term interest rate near zero at least through the end of 2023 to allow the labor market to return to its pre-pandemic strength.

"The vast majority of Americans want to work, and I am not ready to write them off – and I want to give them the chance to work," Kashkari told Reuters in his first public comments since the end of the Fed's policy meeting earlier this week. "As long as inflation expectations remain anchored ... let's be patient and let’s really achieve maximum employment."

Kashkari’s remarks show he’s in a decided minority in an increasingly hawkish Fed, which on Wednesday wrapped up a two-day meeting with an unexpected result: with inflation on the rise, most Fed policymakers now see a case for starting interest rate hikes sooner.

Just three months earlier the clear majority of policymakers favored no change to the current level of borrowing costs; on Wednesday, the central bank's quarterly summary of economic projections (SEP) showed 11 of 18 Fed policymakers penciling in at least two quarter-percentage-point rate increases by the end of 2023.

"I still have no hikes in the SEP forecast horizon because I think it’s going to take time for us really to really achieve maximum employment, and I do believe that these higher inflation readings are going to be transitory," Kashkari said in an interview with Reuters.

In the interview, Kashkari said he believes higher prices are being driven by a reopening economy and will subside as supply constraints recede.

With employment still short of its pre-pandemic level by at least 7 million jobs, he said, "the labor market is still in a deep hole," adding that he believes full employment means a return to at least pre-pandemic labor market strength, if not beyond.

'VERY ORDERLY WAY'

Kashkari, however, showed little discomfort with the Fed's decision this week to open a discussion on when and how to reduce its $120 billion in monthly purchases of Treasuries and mortgage-backed securities (MBS), the first step in moving away from the extraordinary support for the economy that Kashkari feels is still needed.

"I think that (Fed Chair Jerome Powell) is leading us on a path in a very orderly way to have the discussion and look at the data and to make these adjustments prudently," he said.

Once the Fed does determine it's time to taper its asset-buying program, Kashkari said, he expects to follow the same blueprint as in 2014, when the Fed trimmed its purchases of MBS and Treasuries at a steady, predictable pace; reducing MBS purchases more quickly, as some have proposed, would have only a modest cooling effect on the hot housing market, he said.

But, at least for Kashkari, it will probably take beyond September to have enough data to make a judgment on whether there's been sufficient labor market progress to merit any change.

By the fall, he said, schools will be open again, the risk of COVID-19 infection will hopefully have receded, and special pandemic unemployment benefits will have run out. While that should set the stage for more Americans to return to the workforce, it could take longer to see a difference in wages and labor force participation, both critical gauges for the strength of the labor market.

His assessment of the labor market, he said, will color his evaluation of inflation data.

Should there be less improvement in the labor supply than he expects, Kashkari said, he may need to reevaluate his assessment of full employment and, therefore, of how close the labor market is to reaching that goal, and whether the rise in inflation will stop short of becoming persistent.

"The bar for me is very high to reach such a conclusion," he said.

At least some of Kashkari's colleagues may already be there, though, if the "dot plot" of Fed rate-hike expectations, published as part of the SEP, are any guide. They show at least seven policymakers expect a liftoff in rates next year, a number that includes St. Louis Fed President James Bullard.

"It was meant to be a tool providing dovish forward guidance," Kashkari said of the "dot plot."

“It ended up being a tool that provided hawkish forward guidance ... I continue to think we ought to just kill the ‘dot plot.’”

Our Standards: The Thomson Reuters Trust Principles.

Investors brace for annual Russell index rebalancing with pandemic imprint

(Reuters) - Market participants are girding for probably the biggest trading event of the year next Friday, as FTSE Russell stages the final reconstitution of its indexes, and trillions of dollars in investments could be influenced by the event that will reflect a wild trading year marked by the pandemic and the “meme” stock craze.

On the last Friday every June, FTSE Russell refreshes the components in its range of indexes, such as the Russell 2000 (.RUT) index of small-cap stocks and Russell 1000 (.RUI) index of large-cap names. Together they make up the Russell 3000 (.RUA) index. There are also style indexes such as the Russell 1000 growth (.RLG) and Russell 2000 value (.RUJ).

It is often the heaviest trading volume day of the year, as investors and fund managers scramble to buy or sell shares to dozens or even hundreds of companies to reflect changes in indexes. Many this year will be watching "meme stocks" like GameStop or AMC Entertainment whose value soared. Companies that went public through mergers with a Specialty Purpose Acquisition Company (SPAC) will also be on the radar.

As of the end of 2020, about $10.6 trillion in investor assets was benchmarked to Russell's U.S. indexes, according to FTSE Russell.

While FTSE Russell has occasionally tweaked its rules for inclusion in its indexes, such as allowing companies with multiple share classes to remain in or be permitted for inclusion, this year's reconstitution has no methodology changes.

"Our policy team obviously regularly talks to the market participants and our committees and there were no new rules identified that were needed," said Catherine Yoshimoto, FTSE Russell Director of Product Management.

Market capitalization for the Russell 3000 index vaulted from $31.4 trillion in 2020 to $47.7 trillion as of Russell's "rank day" on May 7, 2021.

Stock market volatility took the index on a wild ride in the past two years. In early 2020, stocks sold off when the pandemic hit but then rebounded late in the first quarter to remain about flat from the previous year. This year the market cap for the index surged as stocks have rebounded along with vaccine distribution and a reduction in pandemic-induced lockdowns.

"It’s more assets, more appreciation, you’ve got some stocks that have gotten bigger weight changes so they are going to see more trading volume because there is jumping around, so this is a bigger trade this year than it has been in previous years" said Steve DeSanctis, equity strategist at Jefferies in New York.

The market cap breakpoint Russell uses to determine inclusion in the large-cap Russell 1000 or the small cap 2000 also increased to $5.2 billion in 2021 from $3 billion in 2020.

Perhaps no group of stocks exemplified the pandemic trading environment more than the so-called "meme stocks" such as GameStop (GME.N) and AMC Entertainment (AMC.N).

Shares for those companies had languished and even been shorted by many institutional investors due to poor fundamentals. They took off like a rocket as retail investors using commission-free trading services looked for places to invest government stimulus checks.

The market cap of AMC, for instance, stood at $4.3 billion on the May 7 rank day, but has surged to over $30 billion by June 17, well above the top end of the market cap band for the Russell 2000 index of $7.3 billion set by Russell.

GameStop is expected to graduate to the Russell 1000 large cap index. Managers who have chosen not to own those stocks prefer they stay within the index so as not to disrupt their performance versus the benchmark.

"Where those stocks move will dictate a lot of active manager’s relative performance over the following six, eight or 10 months after the rebalancing," said Keith Buchanan, senior portfolio manager at Globalt in Atlanta.

"I would rather have AMC in the benchmark because obviously since I don’t own it I think it is overvalued." Therefore, if AMC falls, his investments would look better against the benchmark.

Goldman Sachs expects 255 additions to the Russell 3000 and 295 deletions, and expects 57 stocks will enter the Russell 1000, including 34 currently in the Russell 2000. Goldman anticipated a total of 279 stock will enter the small cap index, comprised of 232 new components and 47 being knocked down from the large cap index.

A big portion of expected adds will be companies that went public through a merger with a SPAC. Jefferies' DeSanctis estimates over 25% of additions to the Russell 3000 are SPAC companies.

"It is the year of the SPAC, the year of the meme stock - and here they are having ramifications on real money," said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.

During the event every year, volume surges near the close, often resulting in the biggest trading volume day of the year. The Nasdaq and New York Stock Exchange have contingency plans for the event.

KBW analyst Melissa Roberts expects the bulk of passive fund trading related to the reconstitution will occur in the last 15 minutes or so of the session and estimates the net trade will total nearly $75 billion.

“Let’s face it, for the New York Stock Exchange - Russell reconstitution, from a trading standpoint, is the greatest show on earth, that’s where it all comes down,” said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

Our Standards: The Thomson Reuters Trust Principles.

Bitcoin falls 7% to $35,431.15

(Reuters) - Bitcoin dropped 7% to $35,431.15 at 20:02 GMT on Friday, losing $2,666.53 from its previous close.

Bitcoin, the world's biggest and best-known cryptocurrency, is down 45.4% from the year's high of $64,895.22 on April 14.

Ether , the coin linked to the ethereum blockchain network, dipped 8.66 % to $2,165.68 on Friday, losing $205.45 from its previous close.

Our Standards: The Thomson Reuters Trust Principles.

EXCLUSIVE Google’s adtech business set to face formal EU probe by year-end -sources

(Reuters) - Alphabet (GOOGL.O) unit Google could face its biggest regulatory threat, with EU antitrust regulators set to open a formal investigation into its lucrative digital advertising business before the end of the year, said people familiar with the matter.

It would mark a new front by the EU competition enforcer against Google. It has in the last decade fined the company more than 8 billion euros ($9.8 billion) for blocking rivals in online shopping, Android smartphones and online advertising.

An EU probe would focus on Google's position vis-a-vis advertisers, publishers, intermediaries and rivals, one of the people said, indicating deeper scrutiny than the French antitrust agency's case concluded last week.

Google made $147 billion in revenue from online ads last year, more than any other company in the world. Ads on its properties, including search, YouTube and Gmail, accounted for the bulk of sales and profits.

About 16% of revenue came from its display or network business, in which other media companies use Google technology to sell ads on their website and apps.

Both units are under fire. The U.S. Justice Department, joined by some states, sued Google last year for abusing its dominance in search ads. A group of states led by Texas in a later lawsuit focused on anti-competitive behaviour on the network side of the house.

France last week settled with Google for $268 million and various commitments over similar allegations related to the network business, and the unit also must work closely with Britain’s competition regulator on upcoming software changes as part of a settlement reached days later.

The Commission declined to comment. Google did not immediately respond to a request for comment.

A new EU inquiry could end up targeting all of Google's ad empire. Market researcher eMarketer expects Google to control 27% of global online ad spending this year, including 57% for search ads and 10% of display.

While the numbers may not look monopolistic at first blush, advertisers and rivals contend that Google's various software play a role in so many facets of the market that the company is impossible to avoid.

They say Google takes advantage of the dependence buyers, sellers and intermediaries have on it to extract high fees from all sides and block rivals from fairly competing with it.

In a questionnaire sent to Google rivals and third parties earlier this year and seen by Reuters, the EU watchdog asked if advertisers receive rebates when they use Google intermediaries which allow advertisers or media agencies to buy advertising inventory from many sources.

The Commission should conclude ongoing cases before starting new ones, said Thomas Hoppner, a partner at law firm Hausfeld, and who advises several complainants against Google.

"From the practitioner's point of view and from the industry's point of view, it appears equally important to bring investigations into local search and Google's job search to an end when other authorities have opened investigations into Google's adtech," he said.

($1 = 0.8399 euros)

Former U.S. Ambassador throws support behind embattled Toshiba board chair

(Reuters) - Former U.S. Ambassador to Japan John Roos on Saturday endorsed the continued leadership of Toshiba Corp (6502.T) Board Chairman Osamu Nagayama, who has come under intense pressure to resign amid a deepening crisis at the Japanese conglomerate.

Both Nagayama and Roos served as independent directors at Sony Group Corp's (6758.T) board when the electronic giant emerged from a turbulent earnings period to a sharp recovery.

"I am convinced Toshiba's shareholders will benefit from him continuing to provide his steady hand and strong leadership," Roos said in the statement.

Our Standards: The Thomson Reuters Trust Principles.

Exxon, union try new approach to resolve increasingly bitter dispute

(Reuters) - Exxon Mobil Corp (XOM.N) and the United Steelworkers union (USW) hope to break an increasingly bitter dispute over a Texas refinery contract next week by taking a different approach of sending one negotiator each to contract talks instead of a whole team, company and union officials said on Friday.

Exxon seven weeks ago locked out 650 union workers at its Beaumont, Texas, refinery and lubricants plant after failing to reach agreement on a new contract. On Thursday, negotiators met for only the second time since the lockout but failed to make any headway and stopped talks after about two hours.

Talks have turned fractious. The union has accused Exxon of trying to dissolve seniority provisions, colluding to break the union and falsely claiming the union's seniority terms are unique.

After Exxon tweeted the job-seniority terms it wanted were no different than those at the company's Baytown, Texas, refinery, local 13-2001 union President Ricky Brooks called the tweet "factually untrue."

Exxon said the USW has failed to negotiate seriously on its proposal. "We expect the union to come prepared to bargain in good faith," the company said ahead of Thursday's talks.

The USW has filed a complaint with the U.S. National Labor Relations Board (NLRB) claiming Exxon violated labor laws by improperly monitoring employees and used company resources to launch an effort to dissolve the union.

An employee has circulated information to gain support for a petition to decertify the USW local that represents Beaumont workers, according to the NLRB complaint. Exxon told employees seeking information to contact its human resources department or the NLRB. A vote can be called if 30% of covered employees sign a petition and file it with the NLRB.

"We continue to meet and bargain in good faith with the union," said Exxon spokeswoman Julie King. "The company has at all times acted lawfully and will continue to do so."

In another sign of tensions, the USW this month filed a federal lawsuit in Houston claiming Exxon refused to accept an arbitrator's decision involving two workers.

The lawsuit asked the U.S. court to enforce a ruling calling for two union workers fired from its Baytown refinery to be reinstated and given back pay.

Our Standards: The Thomson Reuters Trust Principles.

Ex-Tesla president sold stocks worth $247 million since June 10-SEC filing

(Reuters) - Long-time Tesla Inc (TSLA.O) executive and president Jerome Guillen, who left the company earlier in June, has sold an estimated $274 million worth of shares after exercising stock options since June 10, according to a filing with the Securities and Exchange Commission (SEC).

The filing, which was submitted to the SEC on Tuesday, said that Guillen expected to sell 215,718 shares for $129 million that day, and that he offloaded another 145,289 stocks worth $89.6 million on June 14, and 90,111 stocks worth $55 million on June 10.

"It could raise some eyebrows for investors," Wedbush Securities analyst Daniel Ives said, adding that investors are going to watch closely to see if he sells more.

Guillen, a former Mercedes engineer who was with Tesla since 2010, oversaw the company's entire vehicles business before being named president of the Tesla Heavy Trucking unit in March. He left the company on June 3. read more

The departure of Guillen, one of Tesla's top four leaders, including CEO Elon Musk, has sparked market concerns about Tesla's future vehicle programs like the Semi electric trucks and new batteries called 4680 cells.

Stock options give employees and executives the right to buy their company's stock at a specified price for a certain period of time. When share prices rise above the exercise price, they can buy the stocks at discounted prices.

It was not immediately known how much Guillen paid to exercise the options.

Our Standards: The Thomson Reuters Trust Principles.

Invest Wisely!

Bulls n Bears 

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INVESTORS DIARY 2021

Company

Event

Venue

Date & Time

Edgars

AGM

virtual

June 30, 8:45am

GetBucks

2019  AGM

Conference Room 1, Monomotapa Hotel, 54 Parklane

July 1, 8:30am

GetBucks

2020 AGM

Conference Room 1, Monomotapa Hotel, 54 Parklane

July 1, 10:30am

Companies under Cautionary

ART

PPC

Dairibord

Starafrica

Fidelity

Turnall

Medtech

Zimre

Nampak Zimbabwe

 <mailto:info at bulls.co.zw> 

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

(c) 2021 Web: <http://www.bullszimbabwe.com>  www.bullszimbabwe.com Email:  <mailto:info at bulls.co.zw> info at bulls.co.zw Tel: +263 4 2927658 Cell: +263 77 344 1674

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