Dapatkan promo member baru Pengeluaran SGP 2020 – 2021.
The drugmaker GlaxoSmithKline has issued a firm rejection of the main demands made by the activist investor Elliott Management, and insisted its chief executive, Emma Walmsley, would lead the new pharmaceuticals and vaccines company after a corporate split next year.
A day after the New York hedge fund published a 17-page letter , in effect demanding Walmsley reapply for her job before the demerger of its consumer healthcare division next year, GSK hit back witha three-page statement defending the company’s strategy.
Elliott demanded GSK appoint new board directors with deep pharmaceutical and consumer health expertise to launch a process to select “the best executive leadership” for the two new companies, in effect forcing Walmsley to reapply for her job.
The drugmaker firmly rejected this demand:
“With New GSK representing the majority of GSK’s existing business, the board is not conducting a selection process post-separation. The board strongly believes Emma Walmsley is the right leader of New GSK and fully supports the actions being taken by her and the management team, all of whom are subject to rigorous assessments of performance.
“Under Emma’s leadership, the board fully expects this team to deliver a step-change in performance and long-term shareholder value creation through the separation and in the years beyond.”
The US dollar has risen to a three-month high today, ahead of the non-farm payroll report (1.30pm UK time, or 8.30am EDT).
This has pulled the pound down to its lowest since mid-April, around $1.3745 (down just 0.15% today).
The euro is also weaker against the dollar, slipping 0.2% to $1.1825, its lowest since early April.
The dollar has been strengthening through this week, as Raffi Boyadjian of XM says:
The US dollar maintained its northward bound on Friday as investors awaited the hotly anticipated jobs report out of the United States for possible clues about Fed tapering. There have been subtle hints from Fed policymakers in recent weeks that the time to start talking about tapering is nearing and a strong NFP print for June would fuel expectations that discussions on how and when to begin withdrawing some of the pandemic stimulus will be held over the summer.
Although any move to taper the $120 billion a month in asset purchases would likely be gradual, it would still make the Fed among the first central banks to start the process. Moreover, the sooner the Fed begins to wind down bond purchases the sooner it can start raising interest rates and the recent jump in short-term yields is reflective of the growing belief among investors that the first rate hike will come in 2023 if not before.
However, with the dollar having already surged significantly this week, there may be limited upside from a strong jobs print. Analysts are expecting nonfarm payrolls to have risen by 700k in June. Forecasts have nudged higher over the last couple of days even though businesses are still reporting difficulties in hiring due to the reluctance of many workers to rejoin the labour force.
The dollar is currently trading firmer on the day against a basket of currencies and has climbed to a fresh 15-month high of 111.65 versus the yen.
The Bank of England’s excellent Bank Underground blog have published an interesting article today on the productivity impact of working from home.
They’ve analyzed a string of academic papers on the WFH issue, and conclude that:
Across a very diverse literature the key lessons are: impacts depend on the nature of tasks, the share of WFH matters, and there is big difference between enforced versus voluntary WFH.
And the caveats are important too: cost savings at the firm level don’t automatically translate into economy-wide productivity gains and evidence on long-run effects remains very scarce.
They point out that WFH can be more productive — but not when teams need to collaborate to fix a complicated, or urgent task:
Perhaps the most well known paper in the literature is Bloom et al (2015). This conducts an experiment to study the impact of WFH on the performance of Chinese call centre workers responsible for airfare and hotel bookings. Workers who volunteered to WFH were randomly assigned to WFH or work in office (WIO), to safeguard against sample selection bias effects. Those assigned to WFH had a 13% performance increase relative to those who were assigned to WIO. Some of this increase is attributed to taking fewer breaks and sick days, and some to quieter working environment which enabled workers to take more calls per minute.
But other studies find that physical separation of workers can reduce productivity for other types tasks, eg when teams need to work together to resolve urgent and complex tasks. Battiston et al (2017) exploit a natural experiment involving 999 call handlers and radio operators in the United Kingdom. They find that performance – measured by the time taken between the creation of the incident by the call handler and the allocation of police officers by the radio operator – is 2% better when teammates are in the same room, and attribute this gain to the benefits of face-to-face communication.
Golden and Gajendran (2019) also find evidence that the impact of WFH on productivity depends on the role. They use matched survey data of employees who WFH voluntarily and their supervisors in an organisation. Overall, the authors find a positive relationship between WFH and job performance. But there was a stronger positive association between performance and the extent of WFH in roles with greater job complexity and less interdependence.
They also point out that home environment relative to office environment is a crucial factor – especially if you’re trying to juggle work and home-school (and particularly for mothers….):
Evidence during Covid lockdown also suggests that working while having children at home is productivity reducing, particularly for mothers. Andrew et al (2020) conduct a survey of UK two-parent households with children aged 4–15 during the school closure period of April–May 2020, and find that mothers were doing only a third of uninterrupted paid-work hours of fathers on average.
The former Aston Martin boss Andy Palmer has been promoted to chief executive of Switch Mobility, a maker of electric buses, as part of a drive to expand its business.
Palmer, who was ousted from Aston Martin last year after a disastrous slump in the luxury carmaker’s share price following its flotation in 2018, was already vice-chairman of the company.
Switch is owned by Ashok Leyland, the Indian maker of buses and commercial vehicles, which is controlled by the Hinduja family. Palmer, 58, will take control of Ashok Leyland’s push into electrical vehicles as it seeks to expand into making electric vans.
Here’s the full story:
The FT say it will give Palmer a chance to “salvage a managerial reputation that was left dented” by the post-IPO tumble in Aston Martin’s share price.
Economics professor Nouriel Roubini has a stern warning for central bankers and finance ministers — their loose monetary and fiscal policies are pumping up asset and credit bubbles to dangerous levels, creating a ‘slow-motion train wreck’.
Roubini explains that the surge in public and private borrowing has put central bankers in a ‘debt trap’: raising interest rates would trigger a recession, but not doing would let inflation run hot, creating stagflation when the next crisis comes along (as history says it inevitably will…)
The warning signs are already apparent in today’s high price-to-earnings ratios, low equity risk premia, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies, the crypto sector, high-yield corporate debt, collateralised loan obligations, private equity, meme stocks, and runaway retail day trading. At some point, this boom will culminate in a Minsky moment (a sudden loss of confidence), and tighter monetary policies will trigger a bust and crash.
But in the meantime, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic ageing in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the Balkanisation of global supply chains…
On Wednesday, the Bank of England’s now-ex-chief-economist Andy Haldane also warned of the risk of a Minsky Moment, unless the Bank started to rein in its stimulus programme.
BoE governor Andrew Bailey, though, argues that there’s no reason to panic, as inflationary price rises will be temporary…..
Oil is still slightly lower today (after hitting its highest levels since late 2018 on Thursday) as traders wait for the results of today’s Opec+ meeting.
Brent crude is still hovering around the $75.65/barrel mark, down 0.25%, after the UAE yesterday effectively blocked a deal agreed by top producers Saudi Arabia and Russia to ease oil cuts by 2 million barrels per day (bpd) by the end of 2021 [an extra 400k per month, from August].
That plan would also extend the remaining cuts until the end of 2022 (rather than finishing next April).
These production curbs were agreed after oil demand, and prices, cratered early in the pandemic – and have been slowly, partially, unwound this year, helping to drive up energy prices.
The UAE, though, is arguing that it actually has more production on tap than the current deal recognises. If its ‘baseline’ is higher, it would be permitted to pump more within the agreement…
OPEC+ sources have said the UAE – though it did not object to the output increase – is arguing that the new deal needs to acknowledge that the UAE has higher production from which cuts are being made.
It says it had previously agreed to a very low baseline figure as a gesture of goodwill and in the hope that the cut would end in April 2022, as was agreed in April 2020.
OPEC+ sources said the UAE wants to have baseline production set at 3.8 million barrels per day versus the current 3.168 million bpd. A higher baseline means a lower actual cut.
The UAE has ambitious production growth plans and has invested billions of dollars to boost capacity. The supply pact, however, has left about 30% of UAE capacity idle, according to sources familiar with UAE thinking.
Cash kept flowing into equities and bonds in the last week, Reuters flags up:
Investors kept on injecting more cash into bonds and equities, BofA’s [Bank of America] latest fund flow statistics showed on Friday, as Wall Street hit new record highs and U.S. government bond yields remained capped below 1.5%.
Fixed income funds attracted $13.2 billion and equities sucked in $9.6 billion in the week to Wednesday, while $25 billion left money market funds, the U.S. investment bank said, citing EPFR data.
This was the sixteenth straight week of inflows for bond funds with $1.1 billion going into U.S. Treasuries.
Prices at the eurozone factory gate rose at a faster pace in May, driven by more expensive energy costs.
Industrial producer prices rose by 1.3% in May in the euro area, and by 1.4% in the EU, compared with April (when they rose 0.9%).
Energy prices rose by 2.1% month-on-month in May, while intermediate goods (used to make final products) were 1.8% pricier.
But other products rose less steeply. Capital goods (physical assets such as machinery and equipment) rose 0.4%, while durable and non-durable consumer goods were both 0.3% up.
On an annual bases, prices were 9.6% higher than in May 2020 – reflecting the pick-up in prices since the early days of the pandemic [energy prices are 25% higher!].
On that helicopter money point…
Ryanair’s passenger numbers surged in June, with the rollout of Covid-19 vaccination programmes across Europe boosting confidence in air travel.
The no-frills airline, which in June reported the biggest annual loss in its 35-year history, carried 5.3 million passengers on 38,000 flights last month. In June 2020, Ryanair carried only 400,000 passengers.
There has been a steady increase in passengers for Europe’s biggest airline in recent months – in April there were 1 million travellers and 1.8 million in May – as the easing of travel restrictions across parts of the continent fuels a gradual recovery in the hard-hit aviation industry.
The green shoots of recovery are also evident in traffic figures issued by Ryanair’s rival Wizz Air, which carried 1.55 million passengers last month. This is more than triple the 502,000 passengers who flew in the same month last year.
China’s stock markets have posted their biggest one-day fall since March, with the CSI 300 index tumbling over 2.8%.
Shares fell in Hong Kong too, where the Hang Seng has lost 1.8%.
The selloff came after China’s president, Xi Jinping, warned that China won’t allow anyone to “bully, oppress, or subjugate” it, in a speech marking the centenary of the Chinese Communist party.
Associated Press explains:
In a speech Thursday, Xi warned that anyone who tries to bully China “will face broken heads and bloodshed.”
Xi appeared to be hitting back at the U.S. and others that have criticized China’s trade and technology polices, military expansion and human rights record. The harsh rhetoric also appeared aimed at a domestic audience. But coming at a time of sharp tension with Washington, it struck an ominous tone.
Investors also anticipate a pullback in central bank support for markets in China, analysts said.
Bloomberg flags up that some investors had expected a period of safety and stability leading up to this week’s centenary, so are now retreating.
Chinese equities slid the most since early March as investors rushed to offload shares, with a perceived period of safety seen ending after the ruling Communist Party’s 100th anniversary celebrations.
The CSI 300 Index finished the session 2.8% lower. Liquor giant Kweichow Moutai Co. and China Merchants Bank Co. were among the top drags on the benchmark. Foreign investors are also dumping mainland shares via trading links in Hong Kong, with net outflows hitting 8.6 billion yuan ($1.3 billion), the most since September.
European stock markets have also risen, with the Stoxx 600 up 0.5% – nearing last month’s record highs.
Richard Hunter, Head of Markets at interactive investor, says the markets have made a good start in July…. but today’s US jobs report could test this optimism….
“Markets have opened the new quarter in fine fettle, with the S&P500 hitting a record closing high for the sixth consecutive session.
The first test of the quarter will come later today with the release of the non-farms payroll data. The current consensus is for 690000 jobs to have been added in June, as compared to a lower than expected figure of 559000 in May, with the unemployment rate expected to dip to 5.7% from 5.8%. At such levels, employment would still be around 7 million jobs below the pre-pandemic peak in February 2020.
A particularly strong reading would raise fresh questions of the Federal Reserve policy, although there is mounting evidence that a shortage of labour could imply that wage inflation is on the way. This follows on from a reading of manufacturing activity which remained positive, but at a lighter clip than the previous month, partly fuelled by a lack of available workers.
Even so, the fact remains that for the moment the Fed is retaining its accommodative stance, with the likelihood of tapering and particularly interest rate rises not on the immediate horizon. Complemented by the multi-trillion dollar stimulus packages being introduced by the White House, conditions are set fair for further economic recovery.
This is also playing out with increasingly positive moves within the major indices. In the year to date, the Dow Jones is up by 13%, the S&P500 by 15% and the Nasdaq by12.7%.
In the City, the blue-chip index of leading shares has hit its highest level in just over two weeks.
The FTSE 100 has risen by 36 points or 0.5% to 7161, its highest since Thursday 17th June (when jitters about possible US interest rate rises spooked the markets).
Conference organiser Informa (+3.2%) is the top riser, after analysts at Berenberg upgraded their recommendation on the firm to ‘buy’ as authorities around the world began lifting their Covid-19 restrictions.
UK housebuilders Barratt Development (+1.7%), Persimmon (+1.2%) and Bellway (+2.4%, on the smaller FTSE 250 index) are also higher, after analysts at Jefferies argued that every company in the sector was a ‘buy’.
Over the past month UK housebuilder share prices have fallen 10%, despite the continued robust housing market. Exploring investor feedback, the bear argument revolves around the view that the market & sentiment is peaking. However we believe forecasts remain well short of including even current market conditions & valuations offer opportunity.
We reiterate our positive stance, upgrading our ratings on Barratt & Bellway bringing all our Housebuilders to Buy.
UK shares also rallied yesterday on reopening hopes, after prime minister Boris Johnson said he hoped England would return to as close to the pre-pandemic status quo as possible on 19 July, although some “extra precautions” may be needed.
Christine Lagarde also rejects the suggestion that eurozone sovereign (government) debt should be cancelled, in her interview with La Provence:
Q: Do you agree with the opinion of some observers that the sovereign debt generated by governments should be cancelled?
First of all, it runs counter to the legislation and would be an infringement of the treaties. Furthermore, it’s an accounting illusion. Most of the coronavirus-related debt contracted by the French Government and purchased on the secondary market as part of monetary policy is recorded on the Banque de France’s balance sheet. The debt canceled would create a gap in the balance sheet that would have to be filled, either through a contribution from the French Government to the Banque de France, or through a reduction in the revenues transferred by the Banque de France to the French Government.
It’s a bit like borrowing from Peter to pay Paul. It makes no economic sense, because interest rates are extremely low at the moment and because if a country were to stop repaying its debts, lenders would be reluctant to fund it. That’s what happened to Venezuela, Argentina and Lebanon.
Lagarde adds that the debt created by countries such as France was “crucial to avoid an economic disaster”.
It was fast and complemented by a European effort, the result of which we have just seen – France’s share of the New Generation EU plan, €39.4 billion, has just been announced, 13% of which is scheduled for disbursement in 2021. Immediate measures have been introduced at the national level, such as the partial unemployment schemes, government loan guarantee schemes, etc.
She adds that Europe now needs a major push to modernise its economies.
It’s not enough to say “let’s be green, let’s go digital”; we must implement the necessary reforms.
Q: But is helicopter money a solution?
Lagarde also insists that the ECB isn’t handing out money – that’s a job for governments:
In its purest definition, i.e. in the form of central bank direct handouts to households and firms, it has never been used. That is a matter for the budgetary authorities, not a central bank.
The US, of course, sent stimulus checks to households as part of its pandemic rescue plan – helping to spur its recovery.
A review of academic papers published yesterday from Positive Money Europe argued that a eurozone helicopter money scheme would boost consumer spending:
The results are unanimous. Consumers always spend a significant fraction, often between 40% and 70%, of the additional money they receive. We can thus reasonably expect that households would likewise spend a significant fraction of helicopter money, if the ECB did implement it.
European Central Bank’s President Christine Lagarde has cautioned that the eurozone recovery remains fragile, as it rebounds from the slump of the pandemic.
In an interview with local French daily La Provence, Lagarde explains how the ECB had scrambled to put together its pandemic stimulus package back in March 2020.
Given the scale of the risk, we came together in extraordinary circumstances. As it was at the start of the lockdown and the ECB premises were closed, we began to work by videoconference, albeit without the equipment that we now have at our disposal. The emergency purchase programme and the massive funding for firms were decided on during the night of 18 March by all of the governors of the 19 central banks.
In my case, I was with some members of my Executive Board around my kitchen table in my apartment in Frankfurt!
That pandemic emergency purchase programme (PEPP) is now on course to buy up to €1.85 trillion of bonds by March 2022, depending on the path of the economy and inflation.
Some hawkish members of the ECB’s governing council have been pushing to slow it, worried that this huge balance sheet expansion will be inflationary.
But Lagarde bats away concerns that this huge stimulus programme is a risk, arguing that the recovery is still not secure.
The most serious risk would have been to do nothing. The ECB’s primary mandate, laid down by Europe’s founders, is to maintain price stability. For that, the economy needs to be running smoothly, there needs to be investment, growth and job creation. It’s in this context that we offered our support by using the two levers of emergency purchases and exceptional loans at extremely favourable conditions.
And we agreed to maintain these measures until at least March 2022, and in any case, until we judge that the coronavirus crisis phase is over. While the recovery is now beginning to get under way, it remains fragile.
Recent economic data has suggested the eurozone is recovering strongly from its double-dip recession last winter, with factory growth hitting a record last month and unemployment falling in May.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Arguably the most important data release of the month for global investors, the US jobs report, is looming over markets today.
June’s Non-Farm Payroll is expected to show a jump of around 690,000 jobs last month (although forecasts vary), up from 559,000 in May, with the unemployment rate dipping to 5.7% from 5.8%.
Wages are forecast to have risen 0.4% in the month, and 3.7% over the last year, as the reopening of the economy has helped to boost pay.
Investors will scrutinise the data closely, for fresh clues on how soon the Federal Reserve will change its monetary policy and begin tapering its stimulus programme — slowing the flow of cheap money into the markets.
A strong jobs report would reinforce confidence in the strength of the US recovery… while a weak one might show that firms are struggling to hire in the scramble for staff.
Yesterday, the number of Americans filing new jobless claims hit a fresh pandemic low – highlighting the strength of the jobs market.
But as Jim Reid of Deutsche Bank points out, more than 7 million jobs are still missing due to Covid-19:
DB’s US economists are expecting a +700k gain for nonfarm payrolls, which in turn they expect to help knock the unemployment rate down a tenth to a post-pandemic low of 5.7%.
Of course, even with a +700k increase, that would still leave the total level of nonfarm payrolls -6.9m beneath its level in February 2020, so there’s still some way to travel before we get back to pre-Covid normality. But in advance of the report, we had a decent report on the weekly initial jobless claims, which fell to a post-pandemic low of 364k (vs. 388k expected) for the week through June 26.
Wall Street hit record highs this week … Ipek Ozkardeskaya, senior analyst at Swissquote, says traders are looking for a strong figure.
Given the steady decline in weekly unemployment claims, we could expect to see a strong figure, but whether it’s stronger than 700’000 is yet to be seen.
The market clearly needs a strong figure to hold on to its upbeat mood, as a surprise weakness in jobs figures wouldn’t get the Fed to do more, when inflation is hovering around a worryingly high 5% and it’s not even sure that it’s a peak. Also, another important thing here is the average earnings, which are expected to have risen to 3.7% in June – to cope with the inflationary pressures, from 2% printed a month earlier.
The fact that many people are now getting new jobs in an environment of rising inflation makes the wages growth even steeper. And of course, if an eventual fall in oil prices could temper inflation, the higher wages are here to stay.
Oil is also on the agenda, as Opec+ ministers will meet today to discuss whether to raise output. Yesterday’s meeting was delayed after the United Arab Emirates balked at a plan to add back 2 million barrels per day (bpd) in the second half of the year.
The standoff could lead oil-producing countries to refrain from increasing output at all, says Bloomberg, falling back on terms that call for production to remain steady until April next year.
Yesterday, Brent crude hit its highest level since October 2018, scaling $76 per barrel, on the prospect of supply remaining tight even as demand continues to improve.
But it’s currently a little lower, down 0.25% so far this session, at around $75.65, ahead of the meeting.
- 10am BST: eurozone producer price inflation index
- 1.30pm: US unemployment report for June
- 3pm BST: US factory orders for May