Category: Business

Deutsche Bank mulls waiving 2020 management bonuses due to coronavirus: source

FRANKFURT (Reuters) – Deutsche Bank (DBKGn.DE) is discussing whether it will waive bonuses for its management board in 2020 due to the fallout from the coronavirus crisis, a person with knowledge of the matter said on Wednesday.

The discussion comes after the European Banking Authority on Tuesday said banks should be “conservative” in how they award bonuses to preserve capital and keep lending to an economy hit by the coronavirus outbreak.

A decision hasn’t been made yet but the bank is likely to result in waiving bonuses for top board members, the person said.

Handelsblatt first reported that Deutsche Bank was considering the measure.

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Coronavirus: Aviation giants lobby for Virgin Atlantic bailout

Britain’s biggest airport and some of the aviation industry’s biggest manufacturers are mounting a frantic lobbying campaign to secure taxpayer support for Virgin Atlantic Airways.

Sky News has learnt that Airbus, Rolls-Royce Holdings and Heathrow Airport have this week written separately to Grant Shapps, the transport secretary, to urge the government to “do all it can to support Virgin in these extremely difficult times”.

In one letter, John Harrison, general counsel and UK chairman of Airbus, warned that Virgin Atlantic’s “collapse could have an extremely negative impact on the A330 [aircraft manufacturing] programme”.

“As you will be aware, all wings for these aircraft are designed and manufactured in the UK, and orders from airlines like Virgin are vital for the continuation of our business,” Mr Harrison wrote.

Similar messages are understood to have been communicated by Heathrow and Rolls-Royce, both of which are also significant customers of Virgin Atlantic.

One industry source said the letters had been written at the instigation of the British airline.

The Airbus executive’s warning represents one of the first signs that Virgin Atlantic regards the coronavirus pandemic as an existential threat.

The carrier recently received a capital injection amounting to more than $100m from Sir Richard Branson’s Virgin Group.

It is now seeking support from the government in the form of several hundred million pounds of credit facilities and guarantees against payments being held back by credit card companies.

Discussions are continuing between the airline and Whitehall officials this week.

Peter Norris, Virgin Group’s chairman, last month urged Boris Johnson to establish an industry-wide support package that could cost in the region of £7.5bn.

Virgin Atlantic has asked staff to take eight weeks of unpaid leave, grounded most of its fleet and announced that its chief executive would take a pay cut for several months.

One challenge for the government in deciding whether to extend special support to the company lies in the fact that its two largest shareholders are Sir Richard and Delta Air Lines, the big American carrier.

Last week, Rishi Sunak, the chancellor, indicated that state aid would be available “only as a last resort” and after the support of broader government schemes and companies’ existing shareholders had been pursued.

He added that help would only be afforded to companies which had demonstrated their value to the wider UK economy and to competition in the aviation sector.

As a privately owned company, Virgin Atlantic may find it difficult to raise equity unless it was prepared to find a new investor at a distressed valuation.

In his letter to Mr Shapps, which was copied to Mr Sunak, Airbus said Virgin Atlantic had played an important role in working towards the decarbonisation of Britain’s aviation industry.

Mr Harrison added that it was “important for UK passengers to have access to a market that has choice and competition”.

“Virgin has a vital role in ensuring this remains the case, and also contributes to the tourism industry in the UK through Virgin Holidays,” he wrote.

Sky News revealed this week that ministers had hired a leading accountancy firm to advise them on rescue requests from airlines and airport-owners that could cost taxpayers billions of pounds.

The aviation industry has warned that it is running out of time to secure funding that would keep some of its most prominent players aloft as the coronavirus outbreak creates the biggest crisis in its history.

EasyJet is also regarded as a likely candidate to require taxpayer’s support if the effective shutdown of the aviation industry lasts for longer than three months.

On Monday, easyJet grounded its entire fleet and said it would furlough thousands of staff.

A spokesman for the DfT said: “The aviation sector is important to the UK economy, and firms can draw upon the unprecedented package of measures announced by the chancellor, including schemes to raise capital, flexibilities with tax bills, and financial support for employees.

“We are continuing to work closely with the sector and are willing to consider the situation of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors.”

Tim Alderslade, the chief executive of lobbying group Airlines UK, described the situation facing airlines as “grave” and said the government was “not doing enough on some of the cross-industry measures they could be putting in place to prop up the sector in the here and now, and to stimulate demand once we enter the recovery stage”.

Airlines also want ministers to underwrite hundreds of millions of pounds in regulatory and air traffic control charges as they seek to navigate through the escalating coronavirus crisis.

Virgin Atlantic declined to comment.

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Worker crunch hits world's top medical glove maker as demand spikes

KUALA LUMPUR (Reuters) – The world’s biggest maker of medical gloves is grappling with a serious shortage of workers as it tries to meet a huge surge in demand as countries such as the United States run out of personal protective gear due to the coronavirus outbreak.

Malaysia’s Top Glove Corp Bhd (TPGC.KL), which makes one out of every five gloves in the world, needs to urgently recruit up to 700 more workers as orders in the past few weeks have doubled, the company told Reuters on Wednesday.

It has already said it would not be able to meet all of the increased demand, and its struggle to recruit workers could make the task of quickly adding production lines even more difficult.

The hiring drive has been hampered by Malaysia’s month-long curbs on travel as well difficulties in flying in workers from countries such as Nepal, the company’s main source of labor.

A relatively industrialized nation of 32 million, Malaysia heavily relies on labor from South Asian countries.

“We were already experiencing a shortage of workers in the beginning of the year, which has now become more serious following the implementation of Malaysia’s movement control order,” executive chairman Lim Wee Chai said.

“At the moment, due to the surge in demand, we require unskilled workers, especially to speed up the packing function and quality assurance function, so that the ready output can be shipped out quickly to our customers.”

Despite the coronavirus restrictions that will last until mid-April, the company managed to recruit some 300 people last month and has engaged staffing firms to look for workers more aggressively. It is now trying to hire more Malaysians and is conducting interviews over WhatsApp video calls.

Top Glove has 18,000 employees and 44 factories in three countries with the capacity to make 73.8 billion gloves a year, which it wants to increase given the global shortage.

An emergency stockpile of medical equipment maintained by the U.S. government has nearly run out of protective gear including masks, respirators, gloves, gowns and face shields, Reuters reported on Tuesday citing officials.

Malaysia, the world’s biggest glove producer, has the highest number of coronavirus infections in Southeast Asia with 2,908 cases.

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Factory activity plunges as coronavirus shock deepens

LONDON/TOKYO (Reuters) – Factories fell quiet across most of Europe and Asia in March as the coronavirus pandemic paralyzed economic activity, with evidence mounting that the world is sliding into deep recession.

Manufacturing activity has tumbled, purchasing managers’ index (PMI) surveys showed on Wednesday, with sharp slowdowns in export powerhouses like Germany and Japan overshadowing a modest improvement in China.

The virus pandemic has infected more than 850,000 people around the globe and forced factories, shops and schools to close amid government-imposed lockdowns.

This has upended supply chains and crushed demand for goods as consumers worried about job prospects rein in their spending and stay indoors.

In the euro zone, IHS Markit’s final March manufacturing PMI sank to lowest since mid-2012, when the currency union’s debt crisis was raging, and was well below the mark separating growth from contraction. [EUR/PMIM]

Data from the United States later on Wednesday is likely to show a sharp decline in factory activity there too as authorities enforce strict lockdown measures to control the spread of the virus. (reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=USPMI%3DECI poll)

U.S. consumer confidence has dropped to a near three-year low as the pandemic shakes people’s lives, with a record number of Americans filing for unemployment benefits.

Output from Britain’s factories shrank at the fastest pace since the debt crisis as the spread of coronavirus led to a spiraling of delays and hammered business confidence. [GB/PMIM]

“With consumers clamping down on all discretionary spending in the current uncertain environment, the manufacturing sector inevitably will struggle further,” said Samuel Tombs at Pantheon Macroeconomics.

Global fund managers polled by Reuters are convinced the world economy is already in recession, similar to economists’ assessments in another Reuters poll. [ASSET/WRAP][ECILT/WRAP]

As the prospect of a deep recession grows, traders on Wednesday made a fresh dart for the safety of government bonds, the dollar and gold <GOL/>.

CHINA HEALING?

Chinese factory activity improved slightly more than expected after plunging a month earlier, its PMI showed, but growth was marginal, highlighting the intense pressure facing businesses as domestic and export demand slumps.

While factories in China gradually restarted operations after lengthy shutdowns and a fall in virus cases allowed the country to start relaxing travel restrictions, activity in South Korea shrank at its fastest pace in 11 years as many of its trading partners imposed dramatic measures to curb the virus’ spread.

“If you look at the Korean numbers, they’re fairly bad … They’re likely to get worse still because Korea will be dependent on parts from Europe and the United States,” said Rob Carnell, Asia-Pacific chief economist at ING in Singapore.

“(Policymakers) have to accept the inevitable that there is a massive global pandemic here, there is an outbreak in almost every country globally and certainly in our region, which is getting to levels that if they don’t take very dramatic action, it’s going to get much worse,” he said.

Japan’s factory activity contracted at the fastest pace in about a decade in March, adding to views that the world’s third-largest economy is likely already in recession.

A separate “tankan” survey by the Bank of Japan showed business sentiment soured to a seven-year low in the three months to March, as the outbreak hit sectors from hotels to carmakers.

“The tankan clearly shows a sharp deterioration in business sentiment and confirms the economy is already in recession,” said Yasunari Ueno, chief market economist at Mizuho Securities.

China’s Caixin/Markit PMI rose to 50.1 last month from February’s record low of 40.3 and just a notch above breakeven mark, while South Korea’s IHS Markit PMI plunged to its lowest since January 2009 when the economy was reeling from the global financial crisis.

In Japan, where the PMI fell to its lowest since April 2009, the ruling coalition has called on the government to secure a stimulus package worth at least 60 trillion yen ($553 billion).

“Things are likely to get a lot worse in the months ahead,” Alex Holmes at Capital Economics said in a note to clients, noting the survey period for the PMIs likely didn’t capture more recent lockdowns such as those in Malaysia and Thailand.

The consultancy expects global gross domestic product (GDP) to fall by more than 3% this year.

Policymakers across the globe have announced massive monetary and fiscal stimulus measures to try to mitigate the economic fallout from the pandemic, keep cash-starved businesses afloat and save jobs.

But many measures have been short-gap steps to deal with the immediate damage to corporate funding and shore up banking systems amid worries of a credit crisis.

The International Monetary Fund has said the pandemic was already driving the global economy into recession, calling on countries to respond with “very massive” spending to avoid bankruptcies and emerging market debt defaults.

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Coronavirus shows U.S. too dependent on cheap medical imports, USTR says

(This Mar 30 story adds missing word “from” in last paragraph.)

WASHINGTON (Reuters) – U.S. Trade Representative Robert Lighthizer on Monday said the United States would seek to promote more domestic manufacturing of key medical supplies in light of the strategic vulnerabilities laid bare by the coronavirus pandemic.

Lighthizer told trade ministers from the Group of 20 major economies (G20) that Washington agreed there was a need to resolve supply chain disruptions and be aware of the impact of its actions on neighbors.

“Unfortunately, like others, we are learning in this crisis that over-dependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy,” Lighthizer said.

“For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”

He warned against efforts to use the health and economic crisis to push “other agendas,” either in trade or elsewhere, and said that such efforts would sow distrust, however. He did not elaborate.

Some U.S. officials are concerned that China could seize on the crisis to push for tariff relief before fulfilling its purchase commitments under a Phase 1 U.S.-China trade deal signed in January.

Some U.S. businesses hit by the tariffs have also urged Washington to provide relief at a time of widespread shutdowns across the United States aimed at curbing the spread of the virus. Others are pressuring the Trump administration to keep the tariffs intact, however.

White House trade adviser Peter Navarro last week denied the Trump administration was considering a three-month deferral of tariff payments on imported goods, saying such a move would “enrich China at the expense of American workers.”

Navarro is also crafting an executive order that would expand “Buy America” provisions to the medical and pharmaceutical sectors – a change that Chinese officials have described as unrealistic and unwise.

Navarro last week said 97% of antibiotics sold in the United States came from China.

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U.S. dollar weakens as Fed measure weighs

NEW YORK (Reuters) – The dollar fell against a basket of major currencies on Tuesday modestly pressured by the weight of Federal Reserve measures meant to ensure there was enough liquidity in the global financial system.

The dollar earlier in the session benefited from quarterly and fiscal year-end demand from portfolio managers and Japanese firms, but trading was choppy, with the dollar alternating between gains and losses.

For the quarter, the dollar =USD was the biggest gainer, rising 2.8%. The Norwegian crown was the biggest loser NOK=D3, falling 18% against the dollar.

Analysts said the steep fall in U.S. equity markets during March led to increased buying of dollars for asset managers seeking to rebalance their portfolios at the end of the month.

But the U.S. currency pared gains in the aftermath of the latest Fed move on Tuesday to expand the ability of dozens of foreign central banks to access dollars during the coronavirus crisis. Essentially, the Fed is allowing foreign central banks to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

It is one of a slew of measures that the Fed unleashed to address liquidity problems caused by the economic fallout from the coronavirus pandemic.

That has dented the dollar’s luster a bit as the supply of the U.S. currency expands.

“The dollar will struggle to extend gains significantly at the moment just because of the relative supply of cash coming in from the Fed in dollar terms,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

In afternoon trading, the dollar index =USD was down 0.2% on the day at 99.042.

It reached 102.99, its highest in more than three years, earlier this month as a global market sell-off fueled a rush for dollars.

Dollar demand has ebbed, but analysts are still forecasting more dollar gains.

Against the yen, the dollar slipped 0.2% to 107.57 yen JPY=EBS. For the quarter, the dollar was down 1.1%.

Tuesday was the last trading day of Japan’s fiscal year and the end of the quarter for major investors elsewhere, which has fueled some volatility as big currency market players close their books. The bulk of those positioning changes caused the dollar to strengthen earlier.

The dollar also weakened after data showed U.S. consumer confidence dropped to a near three-year low in March as households worried about the economy’s near-term outlook amid the coronavirus pandemic.

The euro, meanwhile, was down 0.2% against the dollar at $1.1007 EUR=, falling 1.8% in the first quarter.

Some analysts believed that the dollar is likely to remain supported as investors brace for a sharp economic downturn in the coming quarters.

“The Fed’s efforts so far are the closest thing to taming the dollar’s strength,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

“But the desire to hold dollars remains elevated ahead of what’s expected to be a punishing second quarter for U.S. and global growth.”

Graphic: World FX rates in 2019 here

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Coronavirus lockdown leaves third of ‘ornamental growers’ facing ruin

A major part of the UK’s gardening industry could be destroyed by the coronavirus lockdown – with a third of “ornamental growers” facing ruin within weeks.

The Horticultural Trades Association (HTA) is asking the government to provide direct help to the sector which is facing sales losses of £687m by the end of June due to COVID-19.

And with around 70% of bedding plant sales made between March and the end of May, it warned at least a third of UK ornamental producers may fail in a matter of weeks.

The perishability and seasonality of plants means that an estimated £200m of seasonal plants will have to be scrapped across the ornamental horticulture industry.

HTA chairman James Barnes said: “We have hit a perfect storm in the UK.

“The seasonality and perishability that is unique to our industry means that growers are potentially facing stock losses on an ever-rising scale as each day passes.

“Stock is one of the biggest components of asset value in the sector – stock write offs will destroy the balance sheets of many and make it impossible for them to continue.

“We are calling for the government to work with the HTA, as the industry’s representative body, to come up with a financial support scheme to help those businesses which have had to scrap perishable stock and are facing a huge financial crisis.”

Around 650 businesses across the UK produce ornamental crops and employ more than 15,000 people directly and almost 30,000 indirectly.

Natalie Porter, of Porters Fuchsias in Merseyside, said: “Time is running out.

“Most of our summer stock has already been planted and will be ready in three weeks.

“Our remaining stock due to be planted will be ready in five weeks and go to waste in eight.

“We are facing a potential write-off of £350,000 in the next three weeks due to perishable stock. This would jump to £200,000 per week thereafter.”

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Airlines plan furloughs; Air New Zealand sees smaller carrier in a year

SYDNEY/BENGALURU (Reuters) – Major global airlines projected layoffs, furloughs and capacity cuts over the next few months, with Air New Zealand on Tuesday warning it expected staffing levels to be 30% lower than it is now, due to the coronavirus pandemic.

Airlines have been rushing to shore up liquidity, reduce capital expenditure and cut costs to stay afloat amid the worst crisis to hit the global aviation industry.

Data firm OAG said the aviation industry was less than half the size it was in mid-January due to the rapid capacity cuts implemented by airlines around the world. Around 40% of the world’s passenger jet fleet is now in storage, according to data from aviation firm Cirium.

Air New Zealand (AIR.NZ) said it will lay off about 3,500 employees, nearly a third of its workforce, in the coming months, as the outbreak forced it to cancel nearly all flights.

The virus “has seen us go from having revenue of $5.8 billion to what is shaping up to be less than $500 million annually,” Chief Executive Officer Greg Foran told staff in an email. “We expect that even in a year’s time we will be at least 30% smaller than we are today.”

New Zealand’s national carrier, which employs 12,500 people, warned the layoffs estimate was a “conservative” assumption and the numbers could rise if the domestic lockdown and border restrictions were extended.

Air Canada (AC.TO) will cut second-quarter capacity by 85%-90%, place about 15,200 unionized employees off duty and furlough about 1,300 managers, beginning on or about April 3.

Canada’s largest airline said it is drawing down about C$1 billion ($706 million) in credit to bolster liquidity, while senior executives will forgo between 25%-50% of their salary and board members agreed to a 25% cut.

Low-cost U.S. carrier Spirit Airlines Inc (SAVE.N) is cancelling all flights to and from the New York region after U.S. officials warned against travel to the area because of the pandemic.

On Monday, Germany’s Lufthansa (LHAG.DE) said 27,000 of its staff would reduce hours, Britain’s EasyJet PLC (EZJ.L) said it would lay off 4,000 UK-based cabin crew for two months, and low-cost carrier flydubai said it would reduce staff pay for three months.

U.S. airlines have been pushing the Treasury to release up to $58 billion in government grants and loans and had threatened to quickly start laying off tens of thousands of workers within days if they did not get a bailout.

The $2.2 trillion stimulus and assistance legislation signed into law last week by President Donald Trump gives passenger airlines $25 billion in cash assistance to cover payroll costs and $25 billion in loans, while cargo carriers are eligible for $4 billion in grants and $4 billion in loans.

Treasury said airlines should apply for grants by April 3.

American Airlines Holdings Inc (AAL.O) intends to apply for up to $12 billion government aid, ensuring no involuntary layoffs or pay cuts in the next six months, executives said in a memo to employees.

“We certainly hope and expect that by that time, the virus will be contained, Americans will be flying again and we will be back to flying a full schedule,” Chief Executive Doug Parker and President Robert Isom said in the memo.

In Australia, Virgin Australia Holdings Ltd (VAH.AX) said it was seeking a possible government loan of A$1.4 billion ($864 million) which could convert to equity under certain circumstances to help it weather the coronavirus crisis.

Virgin’s shares are tightly controlled by foreign airlines including Singapore Airlines Ltd (SIAL.SI), Etihad Airways and Chinese conglomerate HNA Group that have also seen a sharp deterioration in revenues.

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Instacart workers strike as labor unrest grows during coronavirus crisis

NEW YORK (Reuters) – Some of the roughly 200,000 workers at U.S. online grocery delivery company Instacart said they were striking on Monday as labor unrest grows globally over safety and wages for people working through the coronavirus crisis.

Workers at an Amazon.com Inc warehouse in Staten Island, New York also plan to walk off the job on Monday.

It was not immediately clear how many Instacart workers were participating in the strike, organized by a group called the Gig Workers Collective, or what impact it might have on operations.

Taking to Twitter and other social media platforms, strikers and their supporters asked for hazard pay increases, paid sick leave and better protective measures while on the job.

Clerks, delivery drivers, stockers, gig workers, fast food workers and others have kept food and essential goods flowing across the country to customers who are safely tucked away at home to help stop the spread of the deadly virus.

San Francisco-based Instacart said on March 23 that it wanted to hire another 300,000 gig workers – including the so-called “shoppers” who buy and deliver groceries – because of a surge in demand.

In New York on Monday, multiple grocery stores listed on the company’s app had no delivery slots available, citing higher-than-normal demand.

It was not clear whether increased demand was caused by a shortage of shoppers due to the walk-off.

Employees of McDonald’s Corp, as well as people who said they worked at Walmart Inc, Harris Teeter, Waffle House, Family Dollar and Food Lion, boycotted work at North Carolina locations on Friday.

Last week, several hundred Amazon employees protested in France, prompting a rebuke the next day from Finance Minister Bruno Le Maire, who said pressure on the employees to work despite concern over inadequate protections was “unacceptable.”

At Amazon’s Staten Island warehouse, which had a reported case of COVID-19, workers planned to walk out, according to media reports.

The workers aimed to protest the decision by the world’s largest online retailer to keep the facility open despite health risks, the reports said. Amazon did not immediately return a request for comment.

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