Business

NEW YORK — Stock markets struggled on Friday as investors weighed a coronavirus vaccine delay against US President-elect Joe Biden's $1.9 trillion stimulus plan, which had already been largely priced in.

Wall Street appeared unimpressed by the gigantic proposal, with all major indices dialing back further from the previous week's record high closes as traders feared the incoming Democratic administration will hunt for revenue in the wallets of companies and consumers.

"Sentiment is being dampened... amid speculation that the increase in government spending could bring about higher taxes," Wells Fargo advisers said in an analysis.

The Dow finished 0.9 per cent lower for the overall week, and the Nasdaq and S&P 500 both lost 1.5 per cent for the same period. US markets are closed for a holiday on Monday.

In Europe, London stocks fell by almost 1 per cent in Friday trading, with sentiment also dented by news that the UK economy contracted by 2.6 per cent in November owing to virus curbs.

In the eurozone, Frankfurt and Paris were off by 1.4 per cent and 1.2 per cent, respectively, with increased travel restrictions said to be weighing on the mood as well.

Asia had already found it hard to make gains overnight.

The dollar was generally higher against other major currencies, while oil prices were more than two per cent lower.

Bitcoin stabilised above $36,000 after a record-breaking run that climaxed last week.

Vaccine letdown 

Further souring sentiment on Wall Street was weak US retail sales data on Friday and mixed earnings from major banks.

The news overshadowed Biden's announcement the day before of the stimulus package aimed at "the twin crises of a pandemic and this sinking economy".

Details include an extra $1,400 cash handout for individuals, a hike in the minimum wage to $15 an hour and billions of dollars to ramp up vaccinations so that 100 million are administered in 100 days.

"Most of what Biden announced, with respect to a fresh fiscal aid package for the US economy, was pretty much in line with expectations," CMC Markets analyst Michael Hewson commented.

Traders also did not like US pharmaceutical giant Pfizer's announcement that it would delay shipments of crucial coronavirus vaccines in the next three to four weeks owing to works at its European plant in Belgium.

Pfizer said modifications at the Puurs factory were needed to boost production capacity from mid-February of the vaccine developed with German partner BioNTech.

Germany, which has the EU's biggest economy, voiced regret over the "last minute and unexpected" delay by Pfizer.

"COVID-19 cases present a clear and present danger," to oil prices in particular, remarked Stephen Innes, chief market strategist at Axi.

Surging virus infections and deaths — and the lockdowns they force governments to impose — are also major obstacles for stock prices.

Portugal entered a fresh lockdown on Friday while Britain began requiring negative tests for entry, and fresh curbs on populations were announced from Brazil to Lebanon to China.

PARIS — The merger of France's PSA and US-Italian rival Fiat Chrysler becomes official on Saturday, creating Stellantis, the world's fourth-biggest automaker by volume.

The long-awaited 50/50 tie-up, which was delayed by the COVID-19 pandemic, is seen as crucial for the two groups to undertake the investment necessary to transition to clean car technology.

The new company will bring together producers such as Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo and Maserati, each of which will continue under their own brand names.

The 14 Stellantis brands will account for about 9 per cent of the global auto market. Together they produced eight million vehicles in 2019.

Ranking behind global rivals such as Volkswagen, Renault-Nissan-Mitsubishi and Toyota, Stellantis will be the fourth-largest automaker by volume and the third-largest by revenue, with a workforce of over 400,000.

John Elkann, Fiat chairman and scion of Italy's storied Agnelli family, will retain his role at Stellantis in what he has called "a challenging era".

"The coming decade will redefine mobility: We are intent on playing a leading role in building this new future," Elkann said earlier this month after the shareholders gave their blessing to what he called the "historic merger".

On Monday, the new group Stellantis, the name derived from the Latin verb "stello" meaning to brighten with stars, will launch on the Milan and Paris stock exchanges followed by its debut in the New York stock market the following day.

In November, PS chief Carlos Tavares warned that "only the most agile, with a Darwinian spirit, will survive".

On Tuesday Tavares, as Stellantis chief executive officer, will hold the new group's first news conference, laying out the vision for the newly merged automaker.

The challenges are many, to turn the range of vehicles to electric-power, to coax back into the new car market drivers who have switched to used cars or rentals, plus the ongoing coronavirus pandemic which is putting major dents into many industries.

PSA's global sales — Peugeot, Citroen, DS, Ope, Vauxhall — fell by 27.8 per cent last year.

Matthias Heck of Moody's sees the merger as a good thing for both the French and Italian makers because it will "improve their global coverage, they can collaborate at the technological level and in various segments and will save money through the synergies and experience of PSA, which has been able to set the right price and manage its costs".

The European Commission had been worried the merger could affect competition in Europe's lucrative van market, with PSA and Fiat Chrysler together accounting for 34 per cent of market share.

To assuage those concerns, the commission said PSA would continue an agreement with Toyota to manufacture vans to be sold under the Japanese brand in Europe.

PSA and Fiat-Chrysler estimate that their marriage will allow up to five billion euros worth of savings through synergies both in the production costs and research.

Such savings will please shareholders but are a worry to the two workforces.

On the trade union side, most saw the merger as inevitable, but remain on their guard.

"Let's see in a year," said Olivier Lefebvre, a delegate of the French FO union. 

WASHINGTON —New applications for unemployment benefits rose sharply in the first week of 2021, with a surge of 181,000 - the biggest increase since the coronavirus pandemic began in March, the Labour Department said on Thursday.

The 965,000 new claims filed in the week ended January 9 was far worse than analysts expected and comes as the world's largest economy continues to reel from a recent spike in virus cases, which have forced states to restrict businesses again.

In addition, 284,470 people applied for benefits under a programme passed during the pandemic to help workers not normally eligible, bringing the total newly laid-off last week to more than 1.2 million.

"The restrictions imposed to combat the third Covid wave clearly have done great damage," said Ian Shepherdson of Pantheon Macroeconomics.

But since Congress approved a new pandemic relief package in late December, Shepherdson predicted claims would drop in coming weeks as new aid package revives businesses.

Also helping the situation is the ongoing rollout of Covid-19 vaccines, which offer the best hope for a return to normalcy, he said.

Nonetheless, the data shows the ongoing toll the pandemic has taken on employment, and since the pandemic began 10 months ago, weekly claim filings have remained above the worst single week of the 2008-2010 financial crisis.

The government reported more than 18.4 million people were receiving some form of aid as of the week ended December 26, slightly less than the week prior, but still a huge amount.

WASHINGTON — The US economy saw little inflation in 2020 amid the disruptions caused by the coronavirus pandemic, with the final month of a year seeing only a slight increase as gasoline prices rose, according to government data released on Wednesday.

The consumer price index (CPI) increased 1.4 per cent for 2020, the Labour Department said in the report reflecting a year during which the economy plunged as the pandemic shut businesses nationwide.

That was down from the 2.3 per cent inflation in 2019.

Amid a still-tentative economic recovery, CPI rose 0.4 per cent in December, seasonally adjusted, in line with analysts' forecasts, accelerating from the 0.2 per cent increase in November, according to the report. 

However the "core" index excluding food and energy rose 0.1 per cent in December, and for 2020 the increase was 1.6 per cent — far below the central bank's 2 per cent goal.

Kathy Bostjancic of Oxford Economics said the muted reading means the Federal Reserve (Fed) is unlikely to soon change its commitment to keep interest rates low to spur employment and to continue buying tens of billions of dollars in bonds.

"The benign core inflation readings support our call that the Fed does not lift the policy rate from the effective lower bound until 2024," she said in an analysis.

The Labour Department said the December increase was driven by an 8.4 per cent surge in gasoline prices.

The food index, both for meals at home and away, rose 0.4 per cent.

PARIS — French auto giant Renault reported on Tuesday that sales by volume slumped 21.3 per cent last year to 2.9 million vehicles in a market down 14.2 per cent due to the coronavirus pandemic.

The fall was "principally due to the company's large exposure to countries which imposed strict lockdowns... in the second quarter, plus an another slowdown in the fourth quarter, especially in France", Renault said in a statement.

For Europe as a whole, sales fell 25.8 per cent to 1.4 million units.

Hybrid and electric vehicles held up better than traditional cars in the second quarter and in the last three months of the year, orders in this segment were up 14 per cent from a year earlier in Europe, Renault said.

"From now on we will focus on profitability rather than sales volume, with unit margins being higher," Renault chief Luca de Meo said. 

Renault continued to dominate the European electric car market last year with sales of 115,888 vehicles, up more than 101 per cent.

Its small ZOE model accounted for the bulk of sales, with 100,000 vehicles.

HONG KONG — Asian markets were mixed on Monday as traders struggled to track another record performance on Wall Street, though investors remain broadly upbeat on the prospect of a further massive stimulus for the US economy, with President-elect Joe Biden calling for a spending spree in the trillions of dollars.

With vaccines being rolled out around the world and key risk events including the US election, Georgia senate run-offs and Brexit now out of the way, observers said focus is now on the expected global recovery from last year's economic catastrophe.

The need for more financial help for the world's top economy was laid out on Friday with data showing 140,000 people lost their jobs in December — the first fall since April — as virus infections and deaths surged across the country.

Biden, who will be sworn in as president on January 20, said he would press for a new rescue package that includes $2,000 direct payments to taxpayers and help for small businesses.

"The price tag will be high," he warned as he promised to lay out his proposals Thursday. "It will be in the trillions of dollars."

He added: "If we don't act now, things are going to get much worse and harder to get out of a hole later."

Investors welcomed the prospect of another spending splurge that will provide a huge boost to the economy, coupled with Federal Reserve financial support and record low rates for the foreseeable future.

The dollar extended gains across the board, and was sitting at a three-week peak against the yen.

 COVID's 'nasty cloud' 

Wall Street's three main indexes all finished last week at all-time highs, but Asia struggled to push on.

Hong Kong, Mumbai, Taipei, Manila, Jakarta and Bangkok were all up but Shanghai, Sydney, Singapore and Wellington fell, while Seoul was also lower despite a rally in market heavyweight Samsung that was fuelled by reports it is in talks with US giant Intel over making some of its best chips.

London, Paris and Frankfurt all fell at the open.

While the broad consensus is for a strong run in equities this year, there is a feeling that the latest rally may be petering out.

"After being bullish for several months, we are definitely becoming more cautious on the stock market up at these levels," said Matt Maley, at Miller Tabak + Co., adding that most of the surge in the S&P 500 from March its March trough is "behind us".

Axi strategist Stephen Innes added that fears about the virus, which continues to wreak havoc around the world and force governments to impose new lockdowns, remained the main stumbling block.

"COVID concerns continue to hang like a nasty cloud over the market, and given a great deal of optimism in stocks and oil is linked to the rollout of vaccines, investors are sitting with fingers and legs crossed that there won't be any negative news flows on this front [which] would prompt a sharp negative market reaction," he said in a commentary.

He also pointed to ongoing China-US tensions after the White House said it would end self-imposed restrictions on official contacts with Taiwan, a move likely to irk Beijing.

The change will add to complications for Biden as he assumes the presidency, with any move to reverse the decision opening him up to accusations of being soft on China.

Oil prices dropped but remain near 10-month highs, supported by hopes for more stimulus and following Saudi Arabia's announcement last week that it plans to slash output by a million barrels a month in February and March.

LONDON — Many British businesses are swiftly discovering that they must now pay duties on exports bound for the European Union, despite the breakthrough Brexit free trade deal clinched over Christmas.

The development, which has already helped spark sliding freight traffic to Ireland, is part of trade disruption that has become increasingly evident this year after Britain's Brexit divorce was finalised on December 31.

Trade has also been badly hampered by new COVID-19 border restrictions, with the roll-out of testing for lorry drivers as Britain races to curb a rampant variant of the deadly virus.

At the heart of the Brexit deal, which came into force on January 1, is the so-called "rules of origin" condition applied to all goods crossing the border.

The rules of origin, a key aspect of all major trade deals, can rapidly turn into a costly headache for businesses.

Under the Brexit provision, any good will be subject to a customs levy if it arrives in Britain from abroad and is then exported back into the European Union.

For example, if a British clothing retailer imports Chinese-made textiles, then it would then have to pay a customs charge if it re-exports the items into a member nation of the EU's single market and customs union.

Put simply, the rules therefore determine whether an export is considered British or not.

 'Businesses blindsided' 

"It is clear that many UK businesses exporting to the EU are going to be hit by tariffs," said Michelle Dale, senior manager at the Manchester office of chartered accountants UHY Hacker Young.

"Businesses have also been completely blindsided by the 'rule of origin' part of the deal, which leaves them at a major competitive disadvantage when selling in the EU. 

"Unfortunately, not enough was done to prepare them for this. It takes years to build an effective supply chain — and using non-EU suppliers is often the best option both in terms of cost and quality."

The Brexit agreement, which was sealed four and a half years after Britons voted to leave the European Union, grants zero customs duties if at least roughly 50 per cent of an exported product is made in the UK.

That applies to the majority of UK exports — but certainly not all of them.

The provision is all the more important because the EU accounts for more than half of Britain's trade.

The London-based Institute of Government think tank argues however that the complexity of supply chains means that proof of origin can be difficult for businesses to ascertain — and hard for authorities to assess.

A raft of British retailers are reportedly rushing to assess the impact of critical deliveries to EU nations, including London's top-end department store Fortnum and Mason.

Collapsed UK high-street department store Debenhams has already shut its online website in Ireland due to uncertainty over post-Brexit trade rules.

 'We need a solution' 

"At least 50 of our members face potential tariffs for reexporting goods to the EU," said William Bain, trade policy adviser at the British Retail Consortium industry organisation.

"We are working with members on short-term options and are seeking dialogue with the [UK] government and the EU on longer-term solutions to mitigate the effects of new tariffs," he added.

High-street retail giant Marks & Spencer warned Friday that the trade deal would "significantly impact" business in the Czech Republic, Ireland and France.

The deal however removes tariffs for Britain's largely foreign-owned carmaking industry, which avoids customs duties for cars manufactured with components made abroad.

Nissan has welcomed the agreement but has not yet indicated what will happen to the Japanese carmaker's largest plant in Europe which is based in Sunderland, northeast England. It had previously warned that a no-deal departure would threaten the factory's future.

Prime Minister Boris Johnson's Conservative government has yet to comment on the precise impact of the rules of origin on the business community.

"We continue to work closely with businesses to help them to adapt to any new trading requirements," a government spokesman said.

AMMAN — Access Bridge Ventures (ABV), a newly launched regionally focused early-stage venture capital fund, has made a first close. The fund, which will target a final commitment of over $25 million, garnered commitments from leading regional institutional investors, including Mubadala Capital, the financial investment arm of Mubadala Investment Company, Saudi Venture Capital Company, Jada, and several prominent family offices, each of whom will gain access to some of the region’s most transformative, home-grown tech companies, according to an ABV statement.

The International Monetary Fund estimates that micro, small and medium enterprises (MSMEs) represent about 96 per cent of registered companies and about half of all employment in the Middle East and North Africa (MENA) region. Despite this, the total financing gap for MSMEs is estimated to be as much as $240 billion, according to the International Finance Corporation, the statement said.

ABV will support high-growth tech start-ups from the Saudi Arabia, UAE, Egypt, Pakistan and the wider MENA region. Working with start-ups in the early stages of their development, ABV will help build regional and international champions across numerous sectors, including health-tech, edu-tech, fin-tech, enterprise-tech and Software as a Service, according to the statement.

Established earlier this year, ABV’s team is led by Issa Aghabi and Rakan AlRashed, who bring 25 years’ experience in investing and exiting tech companies in the MENA region and beyond. Prior to ABV, Issa headed the venture capital activities of the International Finance Corporation in MENA, and Pakistan. Meanwhile, Rakan was part of a leading Saudi investment firm that focused on Small and Medium Enterprises and start-ups.

Commenting on ABV’s launch, Issa Aghabi, Co-Founder and Managing Partner, said in the statement: “The MENA landscape has transformed over the past few years, with entrepreneurs and start-ups acting as a catalyst for economic growth and development. ABV has the unique ability to identify and cultivate this new breed of tech companies, many of which are extraordinary in their own right, and help them realise their full potential. Securing our first close reflects the confidence in ABV’s capabilities and investment strategy, where we lead the round and support our founders throughout their journey, as early as first institutional investor.”

CedarBridge Capital Partners (CedarBridge), a leading middle market private equity firm, has co-founded the fund as part of its mandate to partner with promising founders and management teams and help them expand their investment remit and achieve exceptional growth.

Magellan Makhlouf, co-founder and managing director of CedarBridge, said in the statement: “CedarBridge is proud to have co-founded ABV and we look forward to enhancing their offering with our vast global network and deep sectorial expertise. With our collective experience, ABV is well-positioned to make a meaningful impact and contribute to the growth of the region’s burgeoning tech industry.”

EDINBURGH — Scottish seafood exporters said on Friday they were facing a "perfect storm" from post-Brexit red tape and coronavirus restrictions, which could threaten the future of the industry.

Donna Fordyce, chief executive of Seafood Scotland, said companies had faced a "real challenge" with new customs checks and paperwork, on top of curbs to stop the spread of the virus.

"It's all Brexit-related," she told BBC radio, complaining of "pinch points" in IT systems on both sides of the Channel in England and France.

“We wanted a six-month grace period where we could iron out all these issues, so that when the time came it would be frictionless."

Scottish seafood is mainly exported to markets in northern France, where it is then sold on across Europe. With a live product, time is of the essence.

Exporters warned of the risk of delays before Britain left the Europe Union's customs union and single market on December 31, even with a tariff- and quota-free trade deal.

But Seafood Scotland said firms had been hit by "layer upon layer" of administrative problems which had caused "utter confusion".

In addition, the closure of the French border before Christmas due to coronavirus fears had caused lengthy delays.

Fordyce said in a statement on Thursday that consignments risked going into landfill but also the slump in exports would give fishing fleets little incentive to put to sea.

"In a very short time, we could see the destruction of a centuries-old market which contributes significantly to the Scottish economy," she added.

"It's a perfect storm for Scottish seafood exporters," she said.

Scotland's Europe and External Affairs Secretary Michael Russell said the problems at the borders were "exactly the sorts of issues that Scottish ministers have been raising since the Brexit referendum".

Scotland voted to remain in the EU in the 2016 referendum. The devolved nation's governing, pro-independence Scottish National Party has said Brexit strengthened the argument for Scotland to break away from the rest of the UK.

"The UK Government, with their bad Brexit deal, chose to impose these extra burdens on business at a time of unprecedented challenge — which is utterly unacceptable and very damaging to the economy and for jobs," Russell added. 

Jimmy Buchan, the chief executive of the Scottish Seafood Association, said earlier this week that trucks laden with fresh seafood were being held up in central Scotland due to problems with customs barcodes and lack of veterinary service capacity.

Entire trailers were being emptied so that every box and label can be checked, he said.

"Combined with computer problems on both sides of the English Channel, this is a worrying sign for the days and weeks ahead when the flow of produce will get much greater," he added.

"Ultimately our member businesses lose revenue and prices in the market become depressed in reaction to the problems.

"We are at the point now where the white-fish fleet may have to stop fishing.”

HONG KONG — Shares in China's two biggest companies Alibaba and Tencent tumbled in Hong Kong on Thursday in response to media reports that the Trump administration plans to press ahead with a ban on Americans investing in them.

E-commerce titan Alibaba sank almost four per cent and internet powerhouse Tencent shed 4.7 in morning trade after the Wall Street Journal said officials in multiple government departments were assessing the impact of an investment ban.

Such a move would be another blow to Alibaba, which has come under pressure from Chinese officials as regulators launch an anti-monopoly probe into it, while its fintech giant Ant Group was ordered to drastically change its business model.

The moves come as Beijing puts the squeeze on the once unbridled empire of tech tycoon Jack Ma.

The Wall Street Journal report came the same day the New York Stock Exchange reversed course for a second time to say it would delist three Chinese telecom equities from trading owing to new US government guidance.

Wednesday's announcement capped a dizzying few days of flip-flopping in which the stock exchange announced the removal at the weekend before making a U-turn on Monday, and then saying it would go ahead once more Wednesday.

The latest decision came after Treasury Secretary Steven Mnuchin disagreed with Monday's reversal.

The three state-owned telecom giants plunged, with China Unicom shedding more than 11 per cent while China Telecom was down more than nine per cent and China Mobile slipped more than seven per cent.

Trump issued an executive order in November banning Americans from investing in Chinese companies deemed to be supplying or supporting the country's military and security apparatus, earning a sharp rebuke from Beijing.

On Tuesday night he signed an executive order banning transactions involving Alipay, WeChat Pay and other apps linked to Chinese companies, drawing strong criticism from Beijing.

Alipay is owned by Alibaba and WeChat is owned by Tencent. 

The Wall Street Journal reported that officials at the State Department, Department of Defense and Treasury Department had all discussed how to implement an investment ban on the two Chinese e-commerce giants. 

Any ban could have a profound effect on US markets.

While the three Chinese telecoms firms are comparative small fry for the New York Stock Exchange, Alibaba and Tencent are China's two largest companies. 

At $1.4 trillion, the combined market value of their primary listings is twice the size of Spain's stock market, according to Bloomberg News. 

"If the bans are implemented then it'd be a huge thing for the market," Steven Leung, executive director at Uob Kay Hian (Hong Kong) told Bloomberg.

"It's still too early to say. After the Biden administration starts, the policy could change again."