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Brief: For the world’s leading Covid-19 vaccine makers, news that Merck & Co.’s experimental pill cuts the risk of hospitalization and death in half was the latest blow in a very bad week. Stocks including Moderna Inc. and BioNTech SE have shed about $84 billion in combined value this week in the aftermath of a stock market slump that sent the two companies to their lowest level since July. Selling accelerated on Friday, with BioNTech and Moderna each declining as much as 16% in New York as Merck delivered the news on its experimental pill that Wall Street called a “game changer.” The drug, called molnupiravir, reduced the risk of hospitalization or death by 50% in a study, raising concerns about the long-term revenues for companies providing inoculations.“
Brief: SoftBank-backed Indian hotel chain Oyo Hotels on Friday filed for a public offering, just two days after trendy eyeglass unicorn Warby Parker (WRBY) went public on the New York Stock Exchange. The flurry of activity has become commonplace during a record-breaking surge of IPOs this year that's seen buzzy offerings from the likes of Robinhood (HOOD), Coinbase (COIN), and 23andMe (ME). In a new interview, Suzanne Shank — president and CEO of investment bank Siebert Williams Shank — said the IPO boom comes down to two main factors: companies repositioning themselves during the pandemic and the persistence of low interest rates from the Federal Reserve. "I think we're seeing companies that both benefited from the pandemic, as well as those that are sort of rebooting post-pandemic," she says. "That has really been sparking this increased deal flow."
Brief: It may be no comfort for millions of workers and businesses, but the U.K.’s coronavirus recession was no longer the worst in three centuries. Revisions mean that gross domestic product fell by 9.69% in 2020. That makes it the deepest slump since 1921, when the economy shrank 9.71% in the aftermath of World War I. The decline was previously estimated at 9.85%. Until then, the devastation wrought by the pandemic was thought to have exceeded all recessions since 1709, when the Great Frost led to a 13.4% contraction. The revisions announced Thursday are part of the annual Blue Book, when the Office for National Statistics updates the national accounts based on new sources and methods. While ONS figures go back to 1948, long-run estimates are produced by the Bank of England.
Brief: Zoom’s agreement to buy cloud contact center software company Five9 was scuttled on Thursday, after Five9 shareholders rejected the deal. Zoom said in July that it was acquiring Five9 in an all-stock purchase for $14.7 billion, its first billion-dollar-plus purchase and, at the time, the second-biggest tech deal of the year. The company has now lost an opportunity to quickly broaden its capabilities after its stock rallied during the coronavirus pandemic.Five9 shares fell 2% in extended trading following the statement from the companies. Buying Five9 “presented an attractive means to bring to our customers an integrated contact center offering,” Eric Yuan, Zoom’s founder and CEO, wrote in a blog post. “That said, it was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact center solution.”
Brief: The Covid-19 pandemic has catapulted social issues to the forefront of investors minds, according to the latest global investor study published by Schroders today (September 30).The survey of more than 23,000 people across Europe, Asia and the Americas, revealed that 57% of investors are now placing greater importance on social issues versus environmental issues (55%) compared to pre-pandemic levels. The definition of “people” in the context of the research means those who will invest at least €10,000 (or the equivalent) in the next 12 months or those who have changed their investments within the last 10 years.Whilst the environmental element of ESG investing has been firmly on the radar of global investors since the Paris Agreement, meaningfully addressing social issues – from the consistency of corporate behaviour towards employees during the pandemic to working conditions and a liveable wage – has traditionally been lacking.
Brief: Transport and health ministers of the G-7 countries are due to meet virtually on Thursday to discuss ways to restart international travel, according to people familiar with the matter. The meeting is being organized by the U.K., which holds the presidency of the Group of Seven nations this year, said the people, who asked not to be identified ahead of any official statement. It’s aimed at moving closer to a consensus on how to ease border restrictions. While some countries, notably members of the European Union, have used so-called vaccine passports to successfully resume cross-border travel, others including the U.S. have held back on implementing app-based technology over concerns ranging from politics to privacy or fairness between people who have and haven’t received the shots. Another sticking point has been whether to recognize vaccines in countries where they haven’t been approved.
Brief: The U.K. economy emerged from the winter lockdown more strongly than previously estimated, but the recovery is already running into trouble. Gross domestic product rose 5.5% in the second quarter instead of the 4.8% previously estimated, Office for National Statistics figures published Thursday show. The increase, which reflected the reopening of stores and the hospitality sector, left the economy 3.3% smaller than it was before the pandemic struck. Government spending, exports and business investment were all stronger than previously estimated by the ONS. Hopes that the shortfall might be made up this year are fading, with consumers and businesses facing the twin headwinds of accelerating inflation and supply chain problems. Bank of England Governor Andrew Bailey on Wednesday said that output is unlikely to recover its pre-pandemic level until early next year, later than officials predicted in August.
Brief: David Rogers is having a dream run at Castle Hook Partners, the $1.8 billion hedge fund backed by investors including billionaire Stan Druckenmiller. The fund is up about 120% since April 2020, according to people with knowledge of the matter, after taking a hit in the early part of last year in the pandemic’s initial selloff. It lost 10% in the first three months of 2020, said the people, asking not to be identified because the information is private. The turnaround is in sharp contrast to the fund’s modest returns since starting five years ago with about $900 million. The money included a substantial anchor investment from Druckenmiller who trained Rogers at his former hedge fund Duquesne Capital Management and once described him as an “extremely talented” money manager. Gains in 2020 were evenly split between wagers on equities, rates and foreign exchange, according to one of the people. The firm turned bullish on inflation and commodities late last year, themes that continued to drive performance in 2021, the person said.
Brief: Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shaped their post-COVID future through transformative deals while their advisers struggled to cope with transaction volumes never seen before. A frantic summer of merger activity produced deals worth $1.52 trillion in the three months to Sept. 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data. Third-quarter volumes drove global M&A activity in the first nine months of 2021 to an unprecedented record of $4.33 trillion, overtaking an all-time annual peak of $4.1 trillion hit before the financial crisis in 2007 and forcing investment banks to hike pay for overworked and disgruntled junior staff.
Brief: Expectations for the behavior of institutional investors are changing. As societies around the world deal with the challenges of climate change, a global pandemic, social upheaval and other adversities, institutional investors are being asked to take a much more expansive view of risk than many traditional investment models currently account for. Increasingly, this includes optimizing their investments and overall portfolio for environmental, social and governance (ESG) impact. According to Nuveen’s annual survey of institutional investors, almost 70% of investors indicated that they plan to seek out more ESG-oriented alternative investments in the near term. Additionally, over 70% agree that ESG is about fully integrating environmental, social and governance factors into investment decision-making. With this holistic view, investors can pursue the stability, diversification, financial performance and positive real-world benefits that underpin long-term value growth.
Brief: Central banks that launched massive emergency support to fight the pandemic last year are now planning a global turn in the other direction, with gaps already emerging in their perceived risk of inflation, the need to respond to it, and the pace of the likely return to normal monetary policy. They are confronted with common supply shocks and common risks around a pandemic that continues to shape commerce. "Globally we are still in for a long process," of reopening and adapting to the post-pandemic economy, St. Louis Federal Reserve President James Bullard said this week in a Reuters interview. But the reopening, and particularly the associated inflation, is being felt differently across the developed world, testing officials' understanding of the post-pandemic economy and their ability to hit a shared 2% inflation target without derailing global growth.
Brief: United Airlines (UAL) is set to terminate employees who refuse to get the coronavirus vaccine, under a policy it first established in August. The Chicago-based company has a total of 593 staff members who have not yet been jabbed, and have not applied for an exemption on religious or medical grounds. They now face being fired by the airline for failing to comply with its vaccination rules, however, they will be given a final chance to fall into line, United said. United required its 67,000 US staff members to provide proof of vaccination by 27 September. Employees were given an added incentive of receiving an extra day’s pay if they got their full vaccination dose before 20 September.
Brief: Investors are generally ignoring the significant risks posed by poor human health, a glaring omission in the era of Covid-19. Much like climate change, health poses a systemic risk that investors “cannot diversify away from,” according to a new report from ShareAction, a U.K. nonprofit focused on responsible investing. Through interviews with 30 asset managers, the group found that most aren’t investing in a way that protects human health. The Covid-19 pandemic has made clear the link between health and economic performance. It has also shown that investors who profess to consider environmental, social and governance issues when allocating their capital have many blind spots. In pure financial terms, there’s a lot at stake. The U.K. loses around 300 billion pounds ($406 billion) in economic output each year due to the poor health of its citizens.
Brief: Climate change has returned to the top of the list of insurers’ biggest concerns as the vaccine roll-out and gradual lifting of health restrictions see pandemic fears ease in many countries. Global warming was ranked as the biggest risk to society over the next five to 10 years in a report released Tuesday by French insurance giant AXA SA. While that also topped the ranking in 2018 and 2019, it was outstripped by diseases and pandemics last year as the virus spread across the globe. “Climate change is back at the top of the agenda,” AXA Chief Executive Officer Thomas Buberl said in a statement. “This is good news, since last year we feared that the explosion of health risks may overshadow the climate emergency.” Insurers are being increasingly challenged by global warming as extreme weather events wrought by climate change are expected to keep rising.
Brief: Working remotely in a business built around relationships means adapting in more ways than one. For most financial advisory firms, the pandemic accelerated advancements already underway in virtual communications and paperless transactions. The best businesses maintained their personal connections with clients and safeguarded customer data at the same time. “We are now fully in the cloud,” said Matthew Young, president and CEO of Richard C. Young & Co. in Naples, Florida. For the most part, the transition to operating entirely online has been beneficial for clients and their advisors, particularly with electronic paperwork. “It speeds up the process,” Young said. “We can track it easier and it gets to the client instantaneously.”
Brief: The ability of independent market making firms to provide essential liquidity to Europe’s pension funds and other asset managers during the Covid-19 financial crisis has accelerated their recognition as a vital part of the European capital markets eco-system. A new research report surveying European buyside participants reveals for the first time how market makers stepped up to help the asset managers when some of the traditional providers of risk capital partially withdrew from certain market segments in Europe in the early stages of the pandemic. As asset managers – particularly small and mid-size funds -- were seeking additional sources of liquidity the independent market makers were able to step up. This was made easier as the increasing electronification of the markets enabled asset managers and market makers to engage whilst working from home.
Brief: U.S. prosecutors have brought what is believed to be the first case against bank employees who allegedly exploited multi-billion dollar programs aimed at helping small businesses survive the COVID-19 pandemic. In a case unsealed in Brooklyn federal court on Friday, prosecutors say Anuli Okeke, a former branch manager at Popular Bank in New York, conspired with other bank employees and tax preparers to apply fraudulently for more than $3 million in pandemic relief loans overseen by the U.S. Small Business Administration. Alex Moncion, a spokesperson for Popular Bank, which was not named in the complaint, said on Monday that the bank had alerted law enforcement and bank regulators to the conduct and terminated the employees involved.
Brief: Boeing Co. forecasts that commercial aviation should be back to 2019 levels in two to three years, buoyed by a strong domestic recovery in China and parts of Europe, the U.S. planemaker’s China head said. Various countries’ vaccination rates and differing quarantine requirements will pose some hurdles but “we’re anticipating in the next two to three years that the aviation market will fully recover to 2019 levels,” Boeing China President Sherry Carbary said on the sidelines of Airshow China 2021 in the southern city of Zhuhai on Tuesday. Carbary also said that Boeing was working very closely with the Civil Aviation Administration of China as it waits for its 737 Max model to be cleared by Chinese regulators. China -- the first to ground the Max following the jet’s second fatal crash in Ethiopia in March 2019 -- still hasn’t lifted its ban, though a test flight was conducted in the country in August. Other markets in Asia including India and Singapore have cleared the model to fly in recent months.
Brief: During the pandemic, investors hedged their risks by putting money into more mature technology start-ups, but the trend is expected to endure well beyond Covid-19. The growing interest in later stage funding rounds that started last year as a hedging tool amid Covid-19 also comes as tech companies stay private longer and as so-called moonshot companies blow through capital. Companies developing self-driving cars, for example, require huge amounts of money for multiple years of research and development, according to a technology report from Bain & Company, the global management consulting firm. The number of late-stage deals grew 165 percent from the first quarter of 2020 to the first quarter of 2021, according to Bain & Co.
Brief: A group of senators is calling on the federal government to strike a grand economic plan with provinces, territories, businesses and civil society to drive growth coming out of the pandemic. The report includes calls to rethink how to deliver skills-training programs, to streamline the regulatory system to encourage entrepreneurs and for companies to invest in themselves. The document also says the federal government must come up with a more credible plan to manage the nation's burgeoning debt through new rules to guide budgetary decisions. Senators say the Trudeau Liberals must consider finding more new sources of revenue and suggest the government increase the value of federal sales tax. The report made public today is the culmination of work that started last November and included interviews with some 70 domestic and international experts about how Canada could avoid another era of low economic growth.
Brief: President Joe Biden received a booster shot Monday of the Pfizer Inc.-BioNTech SE Covid-19 vaccine in front of cameras at the White House and said he’ll press for more vaccination mandates to improve the U.S. inoculation rate. Biden, 78, meets guidelines issued last week by the Food and Drug Administration and the Centers for Disease Control and Prevention that those over age 65 get a third vaccination. “If you’re fully vaccinated, you’re highly protected now from severe illness even if you get Covid-19. You’re safe and we’re going to do everything we can to keep it that way with the boosters,” he said before getting his shot. “The most important thing we can do is to get more Americans vaccinated.”
Brief: With a helping hand from the Federal Reserve, the great reopening trade is staging a return on Wall Street as money managers bet the U.S. consumer won’t be cowed by the delta-virus variant. Equities tied to the economic cycle including value and financials are rebounding, while investors just sank $5.5 billion into the largest ETF tracking the Russell 2000 Index of small-cap companies -- the most in five years. Last week’s hawkish U.S. central bank meeting is powering rate-sensitive trades as inflation-adjusted yields hit the highest since June.JPMorgan Chase & Co. data shows hedge funds are re-building exposure to stocks hitched to the expansion, with plenty of ammo to extend longs anew. Meanwhile, an index of economic-data surprises is rebounding from recent lows, suggesting supply-side woes have yet to derail the recovery in investment and consumption as much as feared.
Brief: Wise today released the Wise International Travel Survey, assessing U.S. international travelers’ attitude and willingness to travel abroad. This comes on the heels of the White House announcing that the U.S. will reopen in November to air travelers from 33 countries who are fully vaccinated against COVID-19. According to the three market study of consumers, 82% of U.S. travelers say that as things get back to normal, international travel is one of the things that they’re looking forward to most. While 72% expressed that they are currently planning an international trip. "While the Delta Variant still presents challenges for international travel, consumers are keen to go abroad again," said Lindsey Grossman, director of product, North America for Wise.
Brief: The easing of U.S. and U.K. travel restrictions is breathing new life into European airline stocks. British Airways owner IAG SA has been the star of the show in the last two weeks, soaring 21% after the White House said America would open up to vaccinated foreigners and the U.K. relaxed coronavirus testing requirements for fully jabbed arrivals. Air France-KLM and Deutsche Lufthansa AG have also rallied strongly, as have budget carriers such as Ryanair Holdings Plc. But investors are divided on whether the gains can last and the industry has been a laggard for a long time. European airlines remain about 25% below pre-pandemic levels, underperforming sectors like industrials and retail, which are up as much as 30% from where they were back then.
Brief: Australian Prime Minister Scott Morrison said state premiers must not keep borders closed once agreed Covid-19 vaccination targets are reached. “We can’t stay in second gear,” he said on a Sunday morning television program. “We’ve got to get to top gear in living with the virus.” State governments where Covid-19 cases are low, such as Queensland and Western Australia, have been reluctant to open their borders. Morrison says that will need to change when fully-vaccinated rates reach 80%, which he expects to happen before the end of the year. “I can’t see any reason why Australians should be kept from each other,” the leader said. “And so that puts a heavy, heavy responsibility on those who would seek to prevent that from happening.”
Brief: Federal Reserve Chair Jerome Powell listened to a litany of ways in which the U.S. economy remains distorted by Covid-19 as he and his colleagues calibrate withdrawing emergency pandemic support. “I’ve never seen these kind of supply-chain issues, never seen an economy that combines drastic labor shortages with lots of unemployed people and a lot of slack in the labor market,” Powell told a virtual Fed Listens panel Friday. He didn’t address the economic outlook or monetary policy during the hour-plus event, but got plenty of food for thought: The U.S. central bank gets “tons and tons of data,” he said, but “it doesn’t really live for us until we hear your stories.”
Brief: Canadian office vacancies have reached their highest point in more than a quarter century, surpassing the levels of both the dotcom bubble and the global financial crisis. The distress in the commercial real estate market comes as the COVID-19 pandemic continues to keep workers home and as employers reconsider how much space they’ll need long term. The national vacancy rate reached 15.7 per cent in the third quarter, the highest since 1994, according to a report released Friday by commercial real estate brokerage CBRE Group. Across the country, office buildings that began construction before the pandemic are being completed and hitting the market even as many tenants are walking away from the space they have now, the report says.
Brief: With government bond yields in the US and UK yielding 1.3% and 0.6% respectively, lower than where they started in 2020, and corporate bond spreads narrowing to levels below those seen pre-Covid, the search for sustainable yield in global asset markets has once again become very challenging. Against this backdrop, the hunt for yield is pushing investors further up the risk curve, while pricing suggests investors accept the benign view that current levels of inflation will not persist. The question now is whether there remain any areas to invest where yields remain attractive, economic recovery is not fully reflected in valuations, and which provide some protection in the event inflation proves less transitory than expected. One sector that fulfils these three criteria is property.
Brief: Invest Europe, in partnership with the European Investment Fund (EIF), has published ‘The VC Factor - Pandemic Edition’, a new report illustrating European venture capital’s continued strong support for innovative and fast-growing start-ups in the immediate aftermath of the Covid-19 pandemic in 2020. The study is the second edition of the ground-breaking collaboration between Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, and the EIF - Europe’s largest investor in venture capital funds. It draws on data from 2,611 firms investing into VC and 32,114 start-ups between 2007 and 2020.
Brief: The 2021 edition of The DC Future Book, published by the Pensions Policy Institute in association with Columbia Threadneedle Investments, finds that positive trends in the UK Defined Contribution (DC) pension market have continued despite the backdrop of volatile investment markets due to Covid-19. However, the unprecedented nature of the market volatility should encourage DC schemes to assess the resilience of their default funds allowing them to derive and implement suitable measures to improve member outcomes. As an established annual compendium of statistics, The DC Future Book provides insight into the current state of DC workplace pensions and their likely direction of travel.
Brief: Assets under management held by Investment Association (IA) members grew to £9.4 trillion in the UK by the end of 2020, an increase of 11% compared to the previous year, according to the Investment Management Survey. The annual assessment of the state of the industry found that total funds under management for UK investors also saw an 11% increase year on year, reaching £1.4 trillion in 2020. The recovery and resilience of the industry's recovery through the Covid-19 pandemic has been attributed to quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks. Chris Cummings, chief executive of the Investment Association said: "The investment management industry demonstrated its long termism through the pandemic by supporting the companies it invests in. The swift action of the central banks supported the global economy and the industry rallied to the cause injecting over £22bn into businesses to help them ride out the storm."
Brief: Nuveen’s Brian Nick is among the several strategists who think economic growth has already peaked as the effect of trillions of dollars in fiscal stimulus wears off. Yet he remains optimistic about the stock market. “We still have an overall positive view of where the economy is going to be going over the next five or six quarters,” Nick, the chief investment strategist at the wholly owned TIAA subsidiary, said in an interview on Bloomberg TV’s Surveillance Thursday. “That includes a deceleration in year-on-year earnings growth and deceleration in GDP growth, but there is still much more positive than negative out there. “Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.
Brief: The United Arab Emirates has begun winding down an economic support program launched in response to the coronavirus pandemic as the economy shows signs of gradual recovery, the central bank said in a statement. The reduced reserve requirements for banks won’t change for now and neither will the lower loan-to-value ratio required for first-time home buyers seeking mortgage loans, the bank said. The loan deferral component of the Targeted Economic Support Scheme will expire by the end of 2021 with financial institutions able to carry on tapping a collateralized 50-billion-dirham ($13.6 billion) liquidity facility until the middle of 2022, in line with earlier guidance.
Brief: The number of Americans applying for unemployment aid rose last week for a second straight week to 351,000, a sign that the delta variant of the coronavirus may be disrupting the job market's recovery, at least temporarily. Thursday's report from the Labor Department showed that jobless claims rose by 16,000 from the previous week. As the job market has strengthened, unemployment aid applications, which generally track layoffs, have tumbled since topping 900,000 early this year, reflecting the economy's reopening after the pandemic recession. The four-week moving average of claims, which smooths out week-to-week swings, registered its sixth straight drop — to a pandemic low of 336,000. Jobless claims still remain somewhat elevated: Before the virus tore through the economy in March 2020, they generally numbered about 220,000 a week.
Brief: A new survey of investors has found that the majority lack faith in the government’s ability to tackle record levels of public debt and rebuild the economy post-pandemic. Forex platform HYCM surveyed 1,479 UK investors — all of whom have more than £20,000 ($27,292) invested. Some 60% of that number do not think Boris Johnson and the government have handled the pandemic competently. Some 59% also lack faith in the government’s ability to tackle record levels of public debt. Meanwhile, just under half (48%) believe Rishi Sunak is the right person to be chancellor. However, Sunak does appear to have the backing of wealthier investors, as this figure increases to 70% among those with portfolios worth in excess of £1m.
Brief: U.K. job creation was concentrated in high-skilled, high-pay roles during much of the pandemic, while job destruction occurred mostly among low-paid, low-skilled roles. That’s according to a report published Wednesday by the Institute for Public Policy Research. Noting that the decline in employment has been unevenly spread across sectors, the research group warned that most people who lost their jobs during the crisis are likely to lack the skills and training required to be hired in a the newly created role. The government should “boost it like Biden,” with a stimulus that would mean “employers compete for workers, rather than workers competing for jobs,” IPPR Executive Director Carys Roberts said.
Brief: U.S. demand for cloud-based solutions has continued to grow during the COVID-19 pandemic, as companies recognize they can better prepare for major disruptions by subscribing to software and infrastructure as services, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm. The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report for the U.S. finds the pandemic led to more cloud adoption as companies raced to implement remote work and improve their customers’ digital experience. Cloud applications was the only segment of IT spending that did not decline due to the pandemic, and it continues to grow, ISG says.
Brief: The United States could wipe out 6 million jobs and about $15trn in household wealth if Congress fails to raise the debt ceiling, according to new analysis. Mark Zandi, chief economist at Moody's Analytics, warned of a "catastrophic" fallout that Congress has weeks to avoid if it cannot come to an agreement on whether to raise how much the US government can borrow. While the report notes that shutting down the government would not immediately cause a recession, estimates of the previous 2018-2019 government shutdown put the cost to the US economy at $11bn. The true danger to the economy comes when the Treasury exhausts its funds and defaults on its debt, which the report states would happen around 20 October. If the limit is not lifted by mid-October, the economist predicts gross domestic product falling by nearly 4%, with the unemployment rate rising from 5% to 9%.
Brief: The reopening of transatlantic flights to the U.S. is “great news” for Paris, but it won’t bring air traffic back to where it was before the pandemic, according to the operator of the city’s airports. Paris serves as a hub to connect various continents, and “as long as Asia is closed, notably China,” all incoming traffic to Paris that normally goes to China from Africa, Latin America or North America is being slowed down, Aeroports de Paris Chief Executive Officer Augustin de Romanet said during a media event at Paris Charles de Gaulle airport on Wednesday. “As long as this stickiness exists, we fear we may not return to 2019 levels of traffic,” he said. Romanet said he still expects pre-pandemic traffic to return between 2025 and 2027. For this year, he predicts between 30% and 40% of 2019 levels. ADP will most likely deploy more staff for the expected increase in passengers once flights to the U.S. resume to minimize waiting times, he said.
Brief: Developing economies in Asia will likely grow at a slower pace than earlier expected due to prolonged COVID-19 outbreaks and uneven progress in vaccinations, the Asian Development Bank said in a report Wednesday. The regional lender lowered its outlook for economic growth to reflect renewed coronavirus outbreaks as variants spread, prompting fresh pandemic precautions. The Manila, Philippines-based ADB expects 7.1% growth in 2021, falling to 5.4% in 2022. The forecast in April was for 7.3% growth this year and 5.3% in 2022. Most regional economies will remain below their pre-pandemic levels into 2022, and some of the losses from the crisis will be permanent, ADB economists said.
Brief: Middle-market private equity sponsors have made a remarkably smooth transition during the pandemic, according to research by New York Life Investments Alternatives, an investment advisor, and Coalition Greenwich, a consulting and research firm. Their success is reflected in a stellar performance in deal volume this year, according to data from PitchBook. Middle-market PE sponsors have closed 1,721 deals in the first half of the year for a combined $264.6 billion, putting 2021 on track to break the prior annual record of $416.3 billion in 2019. “Companies that have shown resiliency through 2020 and into 2021 are tracking very, very high values,” said Chris Taylor, head of NYLIA. “And I don’t see that changing anytime soon.”
Brief: Ratings companies reacted slowly to the Covid-19 crisis, raising questions about the reliability of creditworthiness scores and their impact on financial stability, according to the first study into the effect of the pandemic on sovereign ratings. The paper, to be published by the International Review of Financial Analysis, shows the largest three rating agencies (S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings) only reviewed sovereign scores when they were scheduled for regulatory purposes rather than as a fast response to the global spread of coronavirus. Regulations permit the companies to conduct reviews ahead of schedule when circumstances require. The lack of fast movement on ratings “is very worrying because sovereign debt accounts for a large amount in investment portfolios and is clearly not being assessed in a timely manner,” said Patrycja Klusak, a lecturer in banking and finance at the University of East Anglia, one of the authors of the paper.
Brief: Virgin Atlantic Airways Ltd.’s U.S. bookings surged more than 600% overnight Monday from a week earlier after the Biden administration moved to allow most fully vaccinated foreigners to fly there again. New York saw the biggest surge in demand, the U.K. airline said Tuesday, while leisure destinations also performed well. Sales to Orlando, Miami and Las Vegas soared. British Airways said its vacation division saw an almost 700% increase in searches week-on-week to destinations including Los Angeles and Boston. The shares of European airlines and other travel-related companies gained for a second day following the U.S. decision. British Airways’ parent IAG SA led the way with a 7% advance after an 11% gain Monday. Deutsche Lufthansa AG rose as much as 5% and Air France-KLM as much as 3.8%.
Brief: Germany cut planned debt sales in the fourth quarter by 4 billion euros ($4.7 billion), suggesting the surge in borrowing triggered by the coronavirus pandemic is receding. The federal government will raise 1 billion euros less in 15-year bonds, and trim sales of short-term discount paper by 3 billion euros compared with a plan published at the end of last year, the Federal Finance Agency said Tuesday. That means that total debt issuance for 2021 will work out at 500 million euros more than projected, it added. The pandemic brought years of German frugality to an abrupt end, with tens of billions distributed to offset the impact of the disease on the economy and borrowing climbing to a record in 2020.
Brief: Over a million UK investors feel Covid-19 threw their finances off track, according to research by Capital Group.The investors said they were either not on track with their financial plans, or completely thrown off course.The research indicated that one in five investors was knocked off course by the pandemic and that it could take them at least five years to restore their long-term financial plans back to health. In total, 1,003 retail investors aged over 45 years with £50,000 or more in investments were surveyed. The survey was designed to give results that were nationally representative. Findings included that more than a third (37%) of those without a financial adviser lacked confidence in the performance of their investments over the next 12 months, compared to only a fifth of those with an adviser (21%).
Brief: The U.S. will soon allow entry to most foreign air travelers as long as they’re fully vaccinated against Covid-19 -- while adding a testing requirement for unvaccinated Americans and barring entry for foreigners who haven’t gotten shots. The measures announced Monday by the White House are the most sweeping change to U.S. travel policies in months, and widen the gap in rules between vaccinated people -- who will see restrictions relaxed -- and the unvaccinated. The new rules will replace existing bans on foreigners’ travel to the U.S. from certain regions, including Europe. While the move will open the U.S. to millions of vaccinated people and was celebrated by the airline industry, the White House cast the measure as a crackdown, pointing to stricter testing rules and a new contact tracing regime. The new policy will take effect in “early November,” according to the White House, though the precise date isn’t yet clear.
Brief: While the UK is making plans to protect itself from another Covid crisis it is easy to forget that some nations are in the middle of fighting the deadly virus. Vietnam is one such country. Up until the end of April it was a world leader in virus containment. However, since then a deadly fourth wave has caused significant disruption and markets have noticed. All three investment trusts that cover Vietnam are trading on double-digit discounts, despite achieving hefty returns across one and five years, according to figures from Association of Investment Companies (AIC) and FE fundinfo. Vietnam Enterprise Investments (VEIL) has returned 62.7% in one year and is trading on a 14.1% discount, VietNam Holding (VNH) has returned 88.7% and is trading on a 17.9% discount and VinaCapital Vietnam Opportunity (VOF) has returned 40.9% and is trading on a 20.6% discount.
Brief: U.S. and European companies have marked another milestone in their road to recovery from COVID-19, seeing their debt levels relative to profits tumbling to the lowest since before the pandemic erupted in 2020. Net leverage, an important gauge of a company's financial health, refers to net debt as a proportion of EBITDA - earnings before accounting for interest, taxes, depreciation and amortization. At U.S. companies rated investment-grade, it fell in the second quarter to the lowest since 2018, according to BNP Paribas, while European leverage is the lowest since 2019.The trend is a good sign for corporate debt markets, where the lowest-rated segments are outperforming this year, signalling normalising credit quality.
Brief: On the lower floors of HSBC Holdings Plc’s Canary Wharf headquarters, the desks are filling up. Traders, salespeople and close support staff not currently in the office have been told they are expected to be at their workstations on the second to fourth floors of the tower five days a week, according to people familiar with the matter. The only exceptions will be for domestic emergencies and unavoidable family commitments.It's a sign that, after several false starts, the City of London's return to the office is at last gathering pace. At times over the past two weeks, trains have been at their busiest since the pandemic broke out, while the streets have been thronged with workers again.
Brief: The United Arab Emirates central bank sees increased risks of illicit financial flows emerging from the COVID-19 pandemic, including money-laundering and terrorism financing, it said in a report published on Sunday. The use of unlicensed money service providers for money laundering has increased during the coronavirus crisis last year, the report said, as well as the use of e-commerce to launder money. "Widespread lockdowns have resulted in a significant surge in e-commerce. Due to limited ability to move funds and goods during the pandemic, illicit actors are turning to e-commerce as a money laundering tool", it said. The number of so-called "money mules" - people who receive illicit funds into their bank accounts to hold or withdraw and wire elsewhere, taking a commission for their services - increased, the bank said, with accounts in the majority of cases belonging to low income individuals from Africa and Asia.
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