US stocks slid at the open, as investors worries about the rise in Covid-19 cases across the country. However, European stocks were unfazed, with the FTSE 100 trading higher by 1.2% on Friday afternoon
The City watchdog has effectively frozen Wirecard’s UK operations in an effort to protect customers cash amid a growing accounting scandal that forced its German parent company to file for insolvency
Chancellor Rishi Sunak hinted at further economic stimulus in the UK, saying “Obviously the government can do things to help with the recovery. The prime minister will be making a speech later as well. I will be outlining further things in the coming weeks.”
The Chancellor also told Bloomberg that there will be an extraordinarily high bar for any corporate bailouts linked to the Covid-19 crisis, and that they would come with strings attached
Over 67% of Tesco shareholders rejected the supermarket’s pay report amid a row over the chief executive’s pay package. Only 32% approved the resolution
Shopping centre owner Intu formally applied to appoint KPMG as administrators, but said all of its shopping centres will continue to trade
That’s all from us today. We’ll be back on Monday -KM
Amid the flurry of news, we’ve got to catch up with the latest batch of US data ahead of the market open.
Incomes which were initially boosted by US government pay protection programmes during the pandemic in April, have started to fade away as lockdowns started to ease.
The decrease in personal income in May primarily reflected a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in April.
Separately, the core personal consumption expenditures price index edged up 0.1% last month after easing 0.4% in April.
The company, whose centres include Lakeside in Essex and the Trafford Centre in Manchester, said all of its shopping centres will continue to trade and that its “underlying group operating companies” are not affected.
The intu Group’s relationships with its tenants are with these operating companies, not the companies entering administration.
Tesco shareholders reject pay report over CEO remuneration row
Newsflash: More than two thirds of Tesco shareholders have voted down the company’s pay report.
Results from the supermarket’s AGM show that 67.29% rejected the pay report amid a row over the chief executive’s pay package. Only 32.71% approved the resolution.
Dave Lewis’ pay pay rose by more than a third to £6.42m last year, which was the biggest annual haul for an executive at the supermarket since the departure of Sir Terry Leahy nearly a decade ago.
It came after the Tesco board controversially decided to remove the online grocer Ocado from a list of rivals used to rate performance.
Tesco said it was disappointed by the results, considering that it had been “reassured” by many large shareholders that the payout was “proportionate”:
While the Board is pleased that all other resolutions were carried with very large majorities, we are disappointed that the advisory vote on the directors’ remuneration report was not passed.
Following recent engagement on our Remuneration Report with a number of our larger shareholders, we have been reassured that the majority agree that the overall outcome of the 2017 PSP award is proportionate given the outstanding turnaround delivered by management
We recognise, however, that a significant number of shareholders had concerns with the principle of the Committee’s adjustment to the TSR comparator group.
Tesco says its pay committee “will continue to engage with shareholders to fully understand their concerns” and would consider the feedback as it prepares to put its pay policy to shareholders at next year’s AGM.
We will publish an update on our engagement, in accordance with the UK Corporate Governance Code, within six months of the 2020 AGM.
Prime Minister Boris Johnson has been asked if he’ll intervene in the retail sector, in light of shopping centre Intu being on the brink of administration.
He’s said shopping malls have been feeling the squeeze and that the government will do everything they can to look after them, according to Reuters.
Connor Campbell, financial analyst at SpreadEx says European stocks are rising in reaction to further hints of stimulus both in the UK and the EU:
It seems that investors are choosing focus on stimulus-positive remarks from around Europe, instead of the realities of a potential second wave.
Christine Lagarde, who said that we’ve ‘probably passed the lowest point’ of the pandemic, claimed that ‘there is no question’ in her mind that central banks need to use ‘all tools available’ to combat a recession. S
he did go on to warn, however, that she thinks EU leaders won’t reach a final agreement over fiscal stimulus at the July 17th summit.
For the UK, it wasn’t the Bank of England but the Chancellor in the spotlight. When pressed on stimulus, Rishi Sunak said that he ‘will be outlining further things in the coming weeks’.
If hardly a rousing statement of intent, it was still enough of a hint to allow the FTSE to double down on its early growth.
Aston Martin Lagonda will raise £245m in new equity and high-cost debt as the luxury carmaker seeks funding to see it through the slump in revenues caused by the coronavirus pandemic, my colleague Jasper Jolly writes.
The company will issue new shares worth as much as 19.99% of the existing share capital, raising up to £190m from investors in the third major change to its financing this year.
The Aston Martin logo. Photograph: Joe Giddens/PA
Aston Martin will also draw down about $68m (£55m) of borrowing, due to be repaid in 2022, at an expensive 12% interest rate. The borrowing terms were agreed in September, before billionaire Lawrence Stroll effectively took control of the company just as the coronavirus pandemic began.
The pandemic added to the carmaker’s struggles, forcing dealerships around the world to shut and choking off revenues. The company lost £119m in the first quarter, and on Friday it said sales would be lower in the second quarter. More than 90% of its dealership network has now reopened, Aston Martin said.
It has also reduced dealer stock by 617 cars. It will make the first deliveries of the DBX, which was crucial to its pre-pandemic expansion plans, in July.
European stocks are still rising, as investors ignore the Fed warnings on loan losses and rising coronavirus cases on the other side of the Atlantic.
Major European indices continue to march higher on Friday afternoon. Photograph: Tail1/Refinitiv
But over on Wall Street futures pointing to a weak, and potentially mixed start for US stocks:
Dow futures are down 0.1%
S&P 500 futures are up 0.16%
Nasdaq futures are up 0.21%
Naeem Aslam, chief market analyst at AvaTrade, says the resurgence of Covid-19 cases is weighing on sentiment:
The Dow Jones futures are trading lower as traders fail to shake off the fact that the US had its biggest one day surge in coronavirus cases yesterday and it has constrained the re-opening process.
There is no doubt that the second coronavirus wave news has been glum and it may maintain this narrative for some time but the fact is that smart money does see the Texas governor’s recent action of halting the further re-open efforts as a positive sign.
For them, this is the step in the right direction to stamp out the current spike in Covid-19. Measures like this have put an end to the drumbeat of coronavirus news.
Aslam adds that futures are likely to remain sensitive to the fact that the US is struggling to have a “clean re-opening” of the economy which could hamper recovery efforts.
Meanwhile, geopolitical tensions between the US and China still continue to simmer in the background.
UK Chancellor sets "extraordinarily high" bar for bailouts
The Chancellor also told Bloomberg that there will be strings attached to any bailouts linked to the Covid-19 crisis.
The bar for companies accessing taxpayers’ support in a bespoke and significant way is extraordinarily high and should be extremely rare.
A support like that would come with significant strings attached.
Rishi Sunak said they would expect investors to help shoulder the costs of saving UK companies, if it came down to it:
It’s not something that’s an attractive, long term feature of the economy and if we’re in a situation like that one would obviously expect financial investors and creditors to significantly share in the burden.
As for how the government might support over-indebted SMEs (assuming he was talking about larger businesses with Bloomberg), we’re expecting an update fromTheCityUK’s recapitalisation group as early as next week.
That’s expected to outline the most feasible ‘solutions’ for saving small businesses that are servicing unsustainable debts as we try to recover from the Covid-19 crisis.
That could involve turning some of the debt into equity or introducing a kind of profits tax that would only be paid back proportionally once companies get back on their feet.
Chancellor Rishi Sunak has been speaking to Bloomberg TV which pressed him on whether the thought enough had been done to help the UK economy.
Speaking to Bloomberg TV, he said the most important thing for the economy now is to “safely” reopen it, saying this will support billions of jobs in hospitality, leisure and retail.
However, he acknowledged that there are “tragic” projections for “what might happen with employment”
I’ve always been clear that I can’t protect every job, every business despite the unprecedented action that we’ve taken.
(As my colleague Richard Partington reported earlier this week: unemployment is expected to more than double from the current rate of about 4% to levels last seen in the 1980s.)
The Chancellor explained that while household finances seem relatively strong, it is unclear whether consumers are confident enough to drive a speedy recovery.
What we do know is that household balance sheets, consumer deposits, consumer credit, all the numbers we have on that are relatively strong and healthy.
What we don’t know yet is whether people will have the confidence yet to get back to doing all those things and I think that’s the critical thing that we need to make sure is there to help drive the recovery.
But Sunak again hinted that more stimulus us on the way:
Obviously the government can do things to help with the recovery. The prime minister will be making a speech later as well. I will be outlining further things in the coming weeks.
As the Times’ James Hurley points out, funds routed through Wirecard Card Solutions in the UK are not covered by the Financial Services Compensation Scheme (which usually covers deposits of up to £85,000).
However, the FCA actions today should help protect any consumer cash, including those on pre-paid cards that use its services:
Useful list here of prepaid cards run by Wirecard UK. These funds are all now frozen. Money SHOULD be safe in segregated accounts, as long as there has been no funny business with it. Not protected under FSCS. https://t.co/qyKWYK7Xee
Meanwhile, the former number two executive of German payments giant Wirecard has fled to China, my colleague Mark Sweney writes.
Jan Marsalek, a former board member and chief operating officer under suspicion in Germany over Wirecard’s accounting scandal, reportedly flew to the Philippines on Wednesday.
Menardo Guevarra, the Philippine secretary of justice, had ordered authorities to look for Marsalek after his arrival and investigate his involvement in an alleged 1.9bn Euro fraud that caused the collapse of Wirecard.
Bureau of Immigration records show that Marsalek, who was fired from Wirecard on Monday, arrived in Manila on 23 June and left for China from Cebu the next morning, Guevarra told CNN Philippines.
However, Guevarra added that there were no signs of Marsalek on CCTV at the Mactan-Cebu Airport:
What is really bothersome is the fact that it appeared in the database of BI. We want to find out exactly if he arrived here or there was only a glitch or something, but there were certain details appearing in the database, like the aircraft that carried him to Manila and his departure from Cebu via a specific airline going to China.
Guevarra said Marsalek was accompanied by his Filipina wife which was why he was able to enter the country despite coronavirus travel restrictions.
FCA imposes restrictions on Wirecard's UK operations
The Financial Conduct Authority has imposed restrictions on Wirecard’s UK subsidiary, Wirecard Card Solutions, which it says will protect customer cash.
must set out a statement on its website and communicate to customers that it is no longer permitted to conduct any regulated activities
The FCA said it had already imposed restrictions on the UK business after last week’s news that the auditors were not able to trace around €1.9bn in missing cash.
The City watchdog explained:
Our primary objective is to protect the interests and money of consumers who use Wirecard.
Following last week’s news of €1.9 billion missing from the accounts of the German company, Wirecard, we immediately placed requirements on the firm’s UK business so that it should not pay out or reduce any money it holds for its customers except on their instructions.
We have been working closely with Wirecard UK and other authorities over the past few days to take action that protects consumers.
We are continuing to do this and on 26 June, we took additional measures to require the firm to cease all regulated activities in order to further protect customer money. This now means customers money cannot be accessed.
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