TheChek News Flow

Chanel ramps up handbags price by a quarter, Vuitton increased price in March and May, while entry-price products take center stage online.

As China resumes luxury spending, should brands seduce them with tantalizing entry-price baubles, or ramp up prices on more luxurious and iconic handbags? The answer to both tactics seems to be “yes.”

It’s not news anymore that there has been a line outside Chanel since China eased lockdowns from April, but last Sunday, as rumors of significant price increases taking effect on Monday began to spread on social media, the brand’s stores across the country saw unprecedented gains.

Users on China’s popular social commerce platform Xiaohongshu documented their Chanel shopping craze in Beijing, Shanghai, Guangzhou and Hangzhou. One user said she waited for an hour to pay for her purchase as the store was overcrowded.

The price for a Chanel Square Mini in black lambskin will go up 27.4 percent, to $3,815 from $2,995, while there will be a 24.5 percent jump for a small Classic Flap bag, according to Pursebop, a handbag-focused web site.

A source told WWD that the price increases had begun in France on May 7 and elsewhere in Europe beginning May 11, and it will take effect in the U.S. beginning May 25. Chanel did not immediately respond to a request for comment.

Louis Vuitton confirmed to WWD that the brand has increased its prices twice in the past three months: by 3 percent in March and another 5 percent in May, respectively. It means the popular Pochette Monogram Metis will cost $150 more if a consumer buys it now compared to the pre-COVID-19 lockdown.

Prada and Gucci told WWD that they have no plans to increase their prices at the moment.

The pandemic has forced luxury brands to close their stores in Europe and North America for nearly two months, and seen their share prices plummet, while retailers such as Neiman Marcus, J. Crew and True Religion have filed for Chapter 11 bankruptcy protection.

In luxury spending powerhouse China, where life is gradually getting back to normal, luxury brands are implementing a mix of strategies to recapture the business they had lost.

In addition to price hikes for best-selling core products, as Vuitton and Chanel did, brands like Dior, Gucci, Prada, Hermès and Vuitton are also doing major pushes of entry-level products with their China-focused campaigns.

Dior unveiled two local ambassadors for its beauty line last week: Actress Ziwen Wang as its cosmetics ambassador, and Jinyan Wu as the face of the Capture Totale skin-care line. Wu became a household name in China after she starred in the hit Qing dynasty period drama “Story of Yanxi Palace.”

The brand has a history of associating with a dozen Chinese celebrities with massive online followings to help promote Dior’s expansive product categories. Its top six ambassadors alone have a combined following of more than 250 million users on Weibo. It means that the brand can achieve much higher sales conversions than its peers in entry-level categories, including skin care, fragrances and small accessories.

Gucci and Prada, on the other hand, are going big on the 520 Chinese Valentine’s Day with a focus on classic styles and lower-price-point items. The date 520, which sounds like “I love you” in Mandarin, was traditionally considered less important compared to Valentine’s Day on Feb. 14 and the Qixi Festival, a Chinese festival celebrating the annual meeting of the cowherd and weaver girl in mythology for millennia. But as COVID-19 disrupted brands’ original plans, 520 is being treated as the most important festival for love in the country.

Gucci tapped brand ambassadors Chris Lee and Ni Ni, popular idol Lu Han and Song Yanfei, plus four other friends of the house to spotlight GG monogram products in outdoor ads. The campaign will be gradually rolled out on major Chinese social platforms, and each platform will have slightly different visuals and tone of voice to drive engagement. Dionysus, 1955 Horsebit, GG Marmont and Ophidia are key items in this campaign.

Prada’s 520 Mathematics of Love campaign featuring Cai Xukun, the face of the brand in China, saw success in online engagements. On Weibo, Cai’s post about the campaign had 1.58 million likes, and the hashtag #Prada520# has 430 million impressions.

Six items from the 520 collection, including three bags, one pair of sunglasses, one buckle hat and one bracelet with prices ranging from 2,200 renminbi to 13,000 renminbi or $310 to $1,832 at current exchange, are sold out on Prada’s WeChat mini-program store.

Hermès and Vuitton are mixing both tactics. While shipping lots of rare Birkin bags to China and bringing in at least 19 million renminbi, or $2.7 million, in sales on the reopening day of its flagship in Guangzhou’s Taikoo Hui a month ago, Hermès launched a WeChat mini-program store for 520. The program features products with more affordable price-point products such as silk scarves, belts, earrings, sandals, a Baby Hermy toy and a Kelly wallet available in four colorways.

Vuitton worked with China’s top livestreamer, Austin Li, to promote its fragrance collection on Xiaohongshu, as well as releasing a dedicated campaign later this week

Many writers and photographers have been waiting a year or more to be paid for work published by the magazine.

L’Officiel magazine is feeling the effects of the massive shift in global advertising and consumption due to the coronavirus, but a group of former contributors claim issues with getting paid far predate the pandemic.

L’Officiel’s chief executive officer Benjamin Eymère said the company is financially sound overall, currently getting some financing from an unnamed European bank during a “complex time” and looking forward to a “strong second half of the year” buoyed by advertorial initiatives.

But the magazine is making some big changes.

First off, at least six titles of L’Officiel that Eymère’s family business Jalou Media operates directly, including those in the U.S., France and Italy (with another three editions planned for this year), are drastically reducing print frequency. While nearly all L’Officiel titles are currently published either eight or 10 times a year, Eymère said all women’s titles are going down to a quarterly schedule and all men’s titles to only twice a year.

“We’re aligning in all countries,” Eymère said.

That doesn’t include the roughly 25 titles operated by licensees, but the ceo said he’s “pushing them to reduce the amount of print,” while focusing more on social and digital content. That’s the plan for content of directly operated issues, and Eymère said he’s projecting an 80 percent increase in traffic this year and an increase to 40 million in total social media followers from a current 20 million.

“The idea is to keep the print collectible,” Eymère added, noting this is part of a new editorial strategy under Stefano Tonchi, who joined L’Officiel earlier this year in a global editorial role.

Eymère was happy to share audience projections, but declined to share any forecasts on revenue or cash flow for the year. He did allow that the company has some cash on hand because of a successful 2019 and an earlier round of funding in the U.S. The company is backed in the U.S. by Global Emerging Markets, or GEM, an investment group run and founded by Christopher Brown. L’Officiel in the U.S. operates out of the GEM offices in New York.

He also rejected claims that the publication has cut all of its freelancers in response to the coronavirus fallout, a move, along with furloughs and pay cuts, made by numerous other publications. But he admitted L’Officiel will be using far less freelance work given the reduction in print frequency. Eymère also said there have been “no layoffs to permanent staff” and that L’Officiel has even recently hired its first chief financial officer in France and Switzerland, Jean-Phillipe Amos.

It seems the company needs a chief financial officer as it’s dealing with numerous claims of unpaid work. Many previous L’Officiel freelancers in the U.S., France and Switzerland, and even a few who were effectively on staff for a time, say they are trying to get paid for work they did in 2019, and even the year before.

WWD has learned that at least 20 contributors, mainly writers and photographers whose work was published in late 2018 through late 2019, have gone unpaid, with multiple requests for payment to senior staff and executives going generally unheeded. Some of the contributors seeking payment were on the masthead for a time and others were treated as normal staff would be, working full-time hours and having to request days off. But all were only given 1099 tax forms to fill out, meaning they were employed as freelancers.

In all instances of nonpayment, initial assurances of payment, sometimes from as high up chief revenue officer Erica Bartman, turned into radio silence. In at least one instance in Europe, a staffer turned contributor last year filed a legal action in an effort to collect what he claims to be owed. It’s ongoing. In the U.S., a group of roughly a dozen freelancers has started to work with the National Writers Union in an effort to get paid. New York’s Department of Consumer Affairs, which covers labor policy, also confirmed that it’s received a number of complaints about L’Officiel over the last year regarding nonpayment, but attempts to contact the company and resolve the complaints have been so far unsuccessful.

“We’re taking another look to see if there are other options,” a deputy commissioner with the DCA wrote in a statement.

As a group, past L’Officiel contributors in the U.S. alone claim to be owed just under $30,000. Overall, contributors claiming they are owed money have outstanding invoices ranging from around $1,000 to upward of $5,000 and, in one instance, a former contributor is owed more than $10,000.

Of the half dozen contributors WWD spoke or e-mailed with (certain of whom were allowed to discuss the situations of other contributors also trying to get paid) their stories were largely the same. They were assigned work by L’Officiel editors which was published; a 60-or 90-day period passed (a typical time frame for freelance payment at any publication) in which they received no payment; they spent the next several months, up to the present, unsuccessfully contacting leadership in hopes of getting paid. In the U.S., editor in chief Joseph Akel left last fall. Some contributors said he tried to get people the money they were owed, but ultimately failed.

Sasha Frere-Jones is one of the former L’Officiel contributors to have gone unpaid for work he did early last year. He started to contribute to the publication in 2018 under Akel, and had no trouble getting paid until 2019.

“I’ve worked for a lot of people, including people who I don’t like or even respect, and they pay their people,” Frere-Jones said. “This situation is not normal.”

After getting the NWU involved late last year, L’Officiel leadership is said to have initially agreed to a payment schedule for owed U.S. contributors, meaning the publisher would pay off its debt to them in installments because it couldn’t do so upfront. The agreement was revoked as soon as the coronavirus took hold, with the company citing related financial disruptions.

Eymère did not deny at any point that L’Officiel contributors have gone unpaid, but he claimed the situation at hand was not unusual, even after being pushed on the notion that the situation was still “being addressed” as people who worked for his company have waited a year or more to get paid. Even as he said L’Officiel on the whole is “properly financed and has great profit potential in the future.”

“In any business, there’s often a delay in payment for an invoice, it also depends on the reality of the execution of the job,” Eymère said. “This is a normal process you know, and we’re addressing every invoice we have. With corona[virus], sometimes it’s taking more time to address.”

Frere-Jones strongly disagreed with idea that this should be accepted as normal practice. “The idea that this is ok, that this is the normal course of business, it’s not.”

Indeed, in other instances of publications not paying contributors well past the date they were owed, it’s been a sign of severe financial straits. As previously noted, Eymère stressed repeatedly that this is not the case at L’Officiel, saying the company has money coming in and a positive outlook.

Frere-Jones’ goal in fighting for payment is not about the money at this point, as he admits he’s owed less than many other people that have worked for L’Officiel.

“At this point, I’ve actually given up on seeing the money I’m owed,” Frere-Jones said. “I just don’t want this to keep happening to other people.”

Another contributor owed money for more than a year struck a similar tone. The contributor had actually given up trying to get paid, but after realizing there were so many others in the same position decided to get on board again.

“For me, it’s less about getting paid and more that I don’t want anyone in my industry to work with them and have to go through what I’ve gone through,” the former contributor said.

The contributor noted that there is the possibility of a class-action lawsuit through the NWU, should L’Officiel continue holding out payment. But the likelihood of people actually walking away from that with what they’re owed is almost nonexistent, the contributor noted.

As for what recourse former contributors have to get paid for past due invoices, Eymère’s advice is to make sure they have a “validated invoice,” so the company can be sure they’re seeking payment for the work assigned. Then they should contact senior editorial staff with their past invoices. All those seeking payment say they have invoices and have contacted senior staff and executives about nonpayment, repeatedly. Eymère did not deny that some people have waited a year to be paid, but said in these instances “It may be a case of proper commission being discussed.”

“This is the normal course of business, but we’re addressing each invoice,” Eymère said.

Under the Freelance Isn’t Free law, adopted in 2017 in New York City, where L’Officiel U.S. is based, freelancers are entitled to payment, in full, within a contractually agreed upon period. If there was no specifically agreed upon time frame for payment, a publisher has 30 days to pay. No former L’Officiel contributors who WWD spoke to agreed to wait an indefinite period for payment.

In explaining his position, Eymère mentioned the difficulties in keeping track of magazine operations in 30 countries, which — until the recent decision to limit print and related freelance work — averaged 1,500 freelance assignments a year. That equals about four freelance assignments per issue, per month.

He also pointed to changes in staff over the last year, leaving newer hires to have to start rectifying invoices for work they didn’t assign. This was also part of the reasoning the NWU group is said to have gotten initially from the company on why freelancers had had so much trouble getting paid.

“We’re trying to reconcile the old and new staff,” Eymère said. “But the board of the company, shareholders and management are very clear on the fact that everything that is not paid will be addressed in a timely manner.”

Independent group warns that virus must be suppressed rather than ‘managed’

The UK government must rethink its “dangerous” coronavirus strategy, which will “inevitably” lead to local epidemics and further lockdowns, an independent group of scientists said on Tuesday. 

The group, chaired by David King, the government’s former chief scientific adviser, called on Westminster to “take all necessary measures to control the virus through suppression” rather than “simply managing its spread”.

The scientists, dubbed the “independent Sage”, convened as an alternative to the government’s top scientific advisory group, the Scientific Advisory Group for Emergencies, in a push for greater transparency about how key decisions about the UK’s response to the coronavirus pandemic are being made. 

Their report comes just days after the prime minister outlined the first tentative steps towards relaxing the lockdown in England, and unveiled a new “stay alert” slogan, which has drawn widespread criticism for being confusing and unclear.

Dr Zubaida Haque, deputy director of the Runnymede Trust and a member of the group, said the advice to stay alert and to only go to work if you had to and could do so safely was “not a genuine choice for vulnerable people”, who were in effect being asked to choose between staying safe and feeding their families.

“This is a reckless message and it puts the onus of responsibility on individuals,” she said.

The group’s report outlined 18 recommendations for ministers, and said it was crucial that the transmission of coronavirus in the community was controlled before social distancing measures were relaxed.

The goals of “flattening the curve” or ensuring the NHS is not overwhelmed are “counterproductive and potentially dangerous”, it said, adding that if the virus is not suppressed, there will be numerous local epidemics, potentially resulting in more deaths and further partial or national lockdowns.

The group also criticised the government’s decision in mid-March to stop contact tracing, and said it was crucial that ministers implement a two-week quarantine period for anyone entering the country as soon as possible.

Criticising the government’s “top down” approach to testing, which has included outsourcing to private contractors, the scientists said that to be most effective, contact tracing, and management of the disease more generally, should take place at a local level.

“It was a great disappointment that the government has not rebuilt [contact tracing] capacity over the last three months in local authorities,” said Allyson Pollock, professor of public health at Newcastle University and one of the group’s members. 

The scientists also described government statistics about the pandemic as “inaccurate, incomplete and selective”. Prof Pollock said more information was needed about testing targets and their precise goals. 

Although the government has rejected the use of international comparisons of infection and death rates, the group — as well as a wide range of other scientists — said the comparisons could be useful.

The “most striking comparison is the difference between countries that took action quickly”, such as South Korea, Germany and Singapore, and “those that did not”, such as the UK, Spain and the US, the report said.

The group’s recommendations will be sent to Patrick Vallance, the government’s chief scientific adviser, the first ministers of Wales, Scotland and Northern Ireland, and Jeremy Hunt, the chair of the health select committee.

Landsec/British Land: revolution not evolution

Accelerated trends call for an accelerated response

Coronavirus is not the great equaliser some suggested it might become. Great accelerator is more accurate. Societal changes that were once slow and manageable are now sudden and dislocating. Consider Land Securities. The eclipse of physical stores and offices has hit profits hard. Shares down 36 per cent this year fell another 15 per cent on Tuesday.

In lockdown, many products can now only be bought online. Most offices are empty, as white collar staff toil from home. Some of these changes will stick, even if Barclays boss Jes Staley is wide of the mark in speculating big offices are over. Demand for retail and desk space will be permanently lower once the UK reopens fully.

Secular trends including the rise of home working and outsourcing have already chipped away at offices. This is bad news for Landsec, former owner of London’s “Walkie-Talkie” building and its rival British Land, the business behind Broadgate in the City of London. About half of the value of their portfolios is desk acreage.

Office tenants are at least reliable payers. Big banks and corporations are mostly trading through the crisis. Store sales have collapsed. Retailers were responsible for the bulk of Landsec’s missed rent payments in March — covering £15m of a rent roll of £37m. The total value of Landsec’s portfolio fell £1.2bn or 9 per cent last year — mostly from retail sector writedowns.

Shares in both companies trade at about half net book values. Their office properties are vulnerable to falling capital values. Rental prices for City space of close to £100 per sq ft could be a historic peak.

Accelerated trends call for an accelerated response from Landsec and British Land. They must anticipate demand, not chase after it. Lowly Slough Estates rebranded as Segro and built warehouses for the likes of Amazon. It is now worth more than Landsec and British Land combined. The stock of serviced office provider IWG has taken a beating. But demand for flexible office space should be strong once cures and containment cut coronavirus down to size.

German insurance group expects wave of claims related to pandemic

Allianz has warned that the fallout from the coronavirus pandemic is likely to wipe out more than €1bn profit this year as the German insurance group braces for a wave of claims.

The company set aside €400m in the first quarter to cover payouts, largely related to cancelled events and disruption to business caused by the efforts to contain the virus.

“We will definitely see additional headwinds in the future,” chief financial officer Giulio Terzariol told journalists on Tuesday, adding that insurance-related losses could dent its operating profit by 10 per cent, or about €1.2bn.

John Neal, the boss of Lloyd’s of London, last month warned that the pandemic was set to be the costliest event in history for the insurance industry, dwarfing other major disasters such as Hurricane Katrina in 2005 and the 9/11 terror attacks.

Alongside the claims, the turmoil in financial markets could also prove a drag to insurers if it saps the income streams they use to help make payouts.

“There is really a lot of uncertainty,” Mr Terzariol said of the market turmoil. Recent experience has shown that “things can change completely within a week”.

Allianz said it needed more time to come up with a new full-year profit target after scrapping its existing one late last month.

Shares in the company were down almost 3 per cent in early afternoon trading on Tuesday, lagging the German stock market.

One unwelcome surprise for investors was a bigger-than-expected fall in Allianz’s solvency II ratio, a key indicator of balance sheet strength. It fell by 23 percentage points to 190 per cent, worse than the 197 per cent expected by analysts.

Mr Terzariol did not rule out that the ratio may slide below the group’s minimum threshold of 180 per cent later this year.

“This really depends on how share prices, interest rates and spreads on government bonds will behave,” he said. A drop below Allianz’s minimum target “would not be problematic” as the group had more than €30bn in capital reserves to absorb additional shocks, he added.

The first quarter also saw the group’s operating profit suffer a 22 per cent drop to €2.3bn, driven by a 29 per cent decline at its property and casualty insurance business and a 25 per cent fall in life and health insurance.

Pimco, the bond fund owned by Allianz, suffered the worst outflows in five years at the start of the year as retail clients pulled €43bn during the first quarter. Despite the outflows, the operating profit of Allianz’s asset management arm rose 19 per cent from a year ago

Reuters BreakingViews : Late check-in : Hotels can ride out a cleaner, more vacant future

New York’s Four Seasons hotel gives a glimpse into the $600 billion industry’s woes. The iconic hotel owned by Bill Gates and Saudi Arabia’s Prince Alwaleed bin Talal opened its doors to medical personnel but luxuries like minibars are gone, its restaurant replaced by a lobby fridge with box meals. Even when business customers return, some new habits will continue, such as enhanced hygiene protocols that require a 24-hour delay between guests to deep-clean rooms. Hotels will be lucky to run at half occupancy.

That will wipe out profits. Take InterContinental Hotels, owner of the Holiday Inn and Crowne Plaza brands. Like many big chains, it derives most of its revenue from royalties paid by an army of hoteliers using its brands. If these asset owners see a 50% fall in their typical occupancy, they may struggle to pay. In such a scenario, even if the $8 billion group manages to trim costs, its $386 million 2019 profit could sink to a loss. Accor would take a similar hit. If the French owner of the Savoy in London and the Novotel chain’s 4 billion euro revenue halves, the bottom line would likely slip into the red.

These depressed results should be temporary. Unlike the increased security measures introduced in airports after the Sept. 11, 2001 attacks, only some of the higher standards of hygiene may remain once a vaccine is found. InterContinental saw a slight recovery in China with occupancy levels running in the mid-20% range in April, compared to 5% in mid-February.

All of this benefits the bigger, well-capitalised chains. Hilton, for example, hatched a deal with Reckitt Benckiser, the maker of Lysol, and the Mayo Clinic to create new room-cleaning protocols. Accor has 2.5 billion euros of cash thanks to some well-timed asset sales. But as the American Hotel and Lodging Association reckons, hotels could close if occupancy lingers at 35%. That leaves the industry’s minnows particularly exposed.

First, Sweden’s minority government relies on centre-left, centre-right and green parties to pass laws so there’s more political consensus around its pandemic policy than might be the case elsewhere. Second, public trust in the authorities meant guidelines on social distancing were largely followed without a lockdown.

Third, 56% of Swedish households are single occupants without children, by far the highest proportion in the European Union. Viral transmission among cohabitants is therefore less of a worry than, say, in Italy where intergenerational households are more common. That explains why Sweden’s Covid-19 death rate, of around 322 deaths for every million people, is substantially below the UK, Italy and Spain, which imposed full lockdowns.

Still, Sweden’s death toll is higher than its Nordic peers or Germany as a result of the trade-off to limit the economic damage. At least the bet paid off. Swedish GDP shrank 0.3% in the first quarter from the previous three months, less than a tenth of the pace at which the euro zone economy contracted. But other countries might not end up with the same outcome even if they copied Sweden’s virus response.

The generous welfare system makes it easy for Swedish workers to self-isolate without suffering financial hardship. Their country spends roughly a quarter of its GDP on social spending, among the highest in the Organisation for Economic Co-operation and Development, and compensates workers for the majority of wages if they are furloughed. This applies even to the self-employed.

And given public debt amounted to only 35% of GDP in 2019, fiscal policy had plenty of room to help the economy. The government last month announced a 39 billion Swedish crown ($4 billion) scheme to reimburse up to three-quarters of businesses’ fixed costs, based on lost turnover. That will limit layoffs and ensure a brisk recovery. Any country that wants to copy Sweden’s approach to lockdowns would have to replicate a lot more to end up with similar outcomes.

Big Money Managers Take Lead Role in Managing Coronavirus Stimulus

BlackRock is about to start buying billions of dollars in corporate bonds for the Fed, reflecting the firm’s rise to financial might but also opening it to scrutiny

The Federal Reserve’s giant program of corporate bond buying is about to kick in. It will hand a critical new role in propping the struggling economy to a business with increasing clout in the financial world: money management.

The central bank has tapped BlackRock Inc. BLK -1.14% to help it direct money into both new and already-issued corporate bonds, assisting the Fed in its recently adopted role as lender of last resort for businesses. The Fed is expected to launch the program in coming days.

The Fed also has given Pacific Investment Management Co., or Pimco, the job of helping it purchase commercial paper, or companies’ short-term borrowings. That program is already up and running.

The two firms could eventually invest hundreds of billions of central-bank dollars.

Their role as agents of the Fed’s intervention is the latest chapter in a decadelong shift in the financial power structure, with the largest asset managers gaining ground on Wall Street banks.

A few leading asset managers have become critical conduits for directing the money of individuals, pension plans and endowments into U.S. companies. BlackRock and Pimco are shareholders and debtholders in thousands of companies on behalf of funds they manage.

The shareholder votes they control and their role as creditors give them powerful levers. The two collectively manage more than $8 trillion, across markets from bonds to private equity.

They oversee money in exchange-traded funds and traditional mutual funds that are held mainly by individuals. The firms run all kinds of funds and managed accounts. In these, a client entrusts the money-management firm with cash that the firm invests in line with the mandate it’s given, whether betting on individual companies, targeting certain industries or mirroring a market.

Although money-management firms played roles in the 2008 financial crisis, helping to handle toxic assets for the Fed, their remit in the new crisis is far bigger. They will be central players in what is expected to be a multitrillion-dollar overall program of central-bank support to the economy and markets, a program that will help decide which businesses survive the pandemic.

“Here’s a chance for asset managers to show they could be powerful partners in the recovery,” said Ben Phillips, a principal at Deloitte consulting arm Casey Quirk. “They’re organizing capital, as opposed to using their own balance sheet, and can think longer term.”

They are taking on new importance as the biggest investment firms have pushed back on the idea that their reach brings unintended risks for financial systems. Asset managers have successfully fought against the label as “systemically important financial institutions” and the regulations that come with it.

BlackRock will steer as much as $750 billion into the corporate debt market for the Fed.

“BlackRock is acting as a fiduciary to the Federal Reserve Bank of New York,” a firm spokesman said in a written statement.

“BlackRock will execute this mandate at the sole discretion of the Bank, and in accordance with their detailed investment guidelines,” he said, “in order to provide broad support to credit markets and achieve the government’s objective of supporting access to credit for US employers and supporting the American economy.”

Former government officials encouraged administration officials not to hire banks for the corporate-bond buying, said people familiar with the matter. They believed that money-management firms, by not being in the business of arranging debt offerings or maintaining an inventory of bonds for clients, would be best positioned to be impartial.

Also suiting them for the Fed operation, the biggest investment firms have experience managing central bank money, have systems to cordon off work for different clients, and can make informed purchases because they sit in the middle of a stream of information about buying and selling all kinds of securities, the former officials said.

In early March, when data signalled market strains a few weeks after the first U.S. coronavirus cases, Fed staffers examined the tools used in the 2008 crisis. They also laid the groundwork for potentially having the central bank act much more broadly.

Through March’s extreme market volatility, Fed and government officials were on the phone with investors at BlackRock and Pimco as well as Goldman Sachs Group Inc.’s asset-management arm, JPMorgan Chase & Co.’s investment team and State Street Corp., said people familiar with the outreach. They consulted prominent investors such as Mohamed El-Erian, chief economic adviser to Pimco parent Allianz SE.

The officials tapped all kinds of networks to understand what was happening in the commercial paper market; the state of the “repo” market where firms borrow and lend cash and Treasurys; and how the bond market was doing. There was deep trouble in almost every corner of the bond world by mid-March. Junk bonds, investment-grade bonds, Treasurys—all saw shortages of buyers.

During the week of March 15, a Fed official phoned Scott Simon, a former Pimco head of trading and portfolio management, for perspective. Mr. Simon advised the official to regard mortgage real-estate investment trusts as coal-mine canaries signaling danger. Mortgage REITs, which borrow and invest the proceeds in mortgages, and which rarely play a meaningful role in the overall economy, saw their share prices tumble.

Mr. Simon also pointed to an exchange-traded fund, BlackRock’s iShares iBoxx $ Investment Grade Corporate Bond ETF, which was among a swath of bond ETFs trading at steep discounts to the values of the bonds inside them. He said the gap was a sign the bond market was frozen.

“If you don’t fix” the market for top-rated bonds, “it will get away from you,” he told the Fed official, according to a person close to the matter.

During one of the worst weeks in Wall Street history, BlackRock BLK -1.14% Chief Executive Laurence Fink went to Washington and huddled with President Trump as a pandemic with no equivalent in modern history roiled markets. Stocks fell more than 7% the day they met, March 18, and trading almost stopped in several bond markets, making it hard for corporations as well as cities to raise needed cash.

The Fed had said it would intervene substantially in money-market funds, and would shift its purchases of Treasury bills toward a broader range of maturities. Then on March 23 it unveiled sweeping measures. It said it would purchase all kinds of bonds, pledging to do whatever was needed to shore up the economy.

The Fed works with outside firms if it believes they bring speed and expertise the central bank can’t provide on its own. Moving fast, it tapped BlackRock’s financial markets advisory business to buy corporate bonds for it, without a tender process that would let others bid for the job.

That arm of BlackRock, separate from its money-management business, worked for the Fed in handling assets of American International Group Inc. and Bear Stearns Cos. after both collapsed early in the financial crisis.

The issue was who could get a program up and moving fast, said a former senior U.S. official who was an informal adviser to Treasury officials and other policy makers as they formulated plans.

Mr. Simon also pointed to an exchange-traded fund, BlackRock’s iShares iBoxx $ Investment Grade Corporate Bond ETF, which was among a swath of bond ETFs trading at steep discounts to the values of the bonds inside them. He said the gap was a sign the bond market was frozen.

“If you don’t fix” the market for top-rated bonds, “it will get away from you,” he told the Fed official, according to a person close to the matter.

During one of the worst weeks in Wall Street history, BlackRock BLK -1.14% Chief Executive Laurence Fink went to Washington and huddled with President Trump as a pandemic with no equivalent in modern history roiled markets. Stocks fell more than 7% the day they met, March 18, and trading almost stopped in several bond markets, making it hard for corporations as well as cities to raise needed cash.

The Fed had said it would intervene substantially in money-market funds, and would shift its purchases of Treasury bills toward a broader range of maturities. Then on March 23 it unveiled sweeping measures. It said it would purchase all kinds of bonds, pledging to do whatever was needed to shore up the economy.

The Fed works with outside firms if it believes they bring speed and expertise the central bank can’t provide on its own. Moving fast, it tapped BlackRock’s financial markets advisory business to buy corporate bonds for it, without a tender process that would let others bid for the job.

That arm of BlackRock, separate from its money-management business, worked for the Fed in handling assets of American International Group Inc. and Bear Stearns Cos. after both collapsed early in the financial crisis.

The issue was who could get a program up and moving fast, said a former senior U.S. official who was an informal adviser to Treasury officials and other policy makers as they formulated plans.

The Fed will use predetermined rules to guide its investments, to avoid picking winners and losers, said people familiar with the matter.

The central bank said in preliminary disclosures that BlackRock would assess its own ETFs on equal footing with those of competitors, and the firm won’t charge fees on investing in any ETFs. BlackRock will credit income it could earn on the Fed program’s holdings of the firm’s ETFs back to the central bank. There would also be limits on how much of any one ETF could be bought.

That hasn’t stopped investors from trying to get in ahead of the Fed. In April, traders rushed into corporate-bond ETFs, including the one Mr. Simon flagged. They briefly drove the ETF’s price sharply above the bonds’ value. The gap between its price and the net asset value of its underlying bonds has since narrowed.

The central bank gave Pimco a commercial-paper role similar to what it had in 2008, and disclosed no limit on total purchases of the short-term corporate debt. The Fed did give banks one job—processing emergency loans for businesses. State Street will hold custody of assets for a number of Fed programs.

Other firms will be allowed to bid on BlackRock’s and Pimco’s work for the Fed as soon as this summer, said people familiar with the plans.

“If you’re the firm running a large mandate, you’re going to be the first call from brokers and the destination for information. It could make it difficult for other investors to compete,” said Patrick Luby, a municipal strategist at research firm CreditSights Inc. “But there will be benefits for others who can now take advantage of a healthy functioning market,” he added.

The Treasury promised to shoulder any initial losses on the Fed’s mammoth purchases. The central bank isn’t allowed to risk taxpayer money by propping up insolvent companies. During negotiations over the Treasury funds, Senate banking committee members tried to lock in prescriptive terms on how the Fed and Treasury would deploy the money. Fed officials voiced concerns, and won flexibility.

Excess UK deaths in Covid-19 pandemic top 50,000

Official figures from statistical agencies much higher than government’s coronavirus tally, which stands at 32,065

The number of UK deaths during the coronavirus pandemic over and above normal levels has exceeded 50,000, official figures confirmed on Tuesday.

The Office for National Statistics said that in the week ending May 1, there had been 17,953 deaths in England and Wales recorded, 8,012 higher than the average of the past five years in that week, as the disease killed three times the normal number of people in care homes.

This represented the seventh consecutive week that deaths exceeded normal levels and once equivalent figures from Scotland and Northern Ireland were included, takes total mortality across the UK during the pandemic to 50,979.

Nick Stripe, head of life events at the ONS, told the BBC: “[The figures are] actually the seventh highest weekly total since this data set started in 1993 so we have had four out of the top seven weeks in the last four weeks”.

At present this is the highest absolute level of excess deaths in Europe, although figures for Italy are not yet comparable because they are only available to the end of March.

The official figures from the UK’s statistical agencies are much higher than the daily announcement from the Department of Health and Social Care, which stands at 32,065.

Excess deaths is seen by ministers and the government’s scientific advisers as the best ultimate measure of the deadly impact of coronavirus. It includes people who died with the disease, but without being tested, in the community and in care homes.

It also includes indirect victims of the pandemic who died, perhaps because they were unable or unwilling to attend hospital for treatment.

The 50,979 figure for excess deaths is also higher than the Financial Times updating model predicted two weeks ago because more people had died outside hospitals than expected.

The FT model now estimates that slightly more than 60,000 more people will have died than normal from the start of the outbreak to May 11, based on the excess deaths to date and the latest daily figures from hospital deaths.

The big discrepancy between the daily government announcements in deaths and those recorded by the ONS again came in care homes, where mortality during the Covid-19 epidemic has been far higher than normal.

Mr Stripe said: “For the first time that I can remember, there were more deaths in total in care homes than there were in hospitals in that week.”

In the week ending May 1, 6,409 deaths were registered from people in care homes, more than three times the normal rate of 2,019 death registrations in England and Wales’ care homes in the last week of April.

Since the pandemic started, there have been 19,900 more deaths in care homes than normal for the time of year in England and Wales.

Evidence is growing that the virus became seeded among the most vulnerable and frail and elderly people in social care after hospitals discharged sick people into the care system without being tested for Covid-19 to build capacity in hospitals that was not then needed.

The level of excess death registrations had declined for the second week running, indicating that the lockdown had enabled the health system to suppress the virus and reduce its incidence in the community.

In the official data to date, from the week ending March 20 to May 1, there have been 46,566 excess deaths in England and Wales, 3,710 in Scotland and 703 in Northern Ireland.

Most of the deaths relate to a period just before the registration period because there is an average delay of four days between the date of death and its registration.

International comparisons with the UK figure cannot be completed yet because Italy has only registered total deaths up to the end of March.

In France and Spain, the level of deaths in the latest data has gone back to normal, while it is still 80 per cent more than normal levels in the UK.

UK telecoms group posts strong full-year results and maintains dividend

Vodafone said it had no plans to gatecrash the £31bn merger of rivals Virgin Media and O2 as it reported strong full-year results and maintained its dividend.

The British company has long been seen as a potential merger partner for Liberty Global’s cable business, Virgin Media, and has held talks with the US company in the past. Some analysts and bankers thought Liberty’s deal with O2 would be a potential trigger for Vodafone to make a rival offer.

But Nick Read, Vodafone’s chief executive, said it would continue to focus on organic growth in the UK.

The merger with O2 has put a steep value of £18.7bn on Virgin Media.

Mr Read said that BT’s £12bn fibre investment plan would encroach on Virgin Media’s market share in broadband. He said Vodafone could become a “strong anchor tenant” for the new full-fibre network, which it would lease to connect customers to high-speed broadband.

He added that Virgin Media’s lucrative pay-TV business was at risk from cord-cutting as customers turned to Netflix and other streaming services in the UK. “I do worry about the TV market.”

Virgin Media declined to comment.

Vodafone has pursued convergence — the combination of broadband, mobile and pay-TV services — in markets including Germany but Mr Read said the UK had a different structure, with Virgin Media more of a “regional” player compared with nationwide cable companies in Europe.

Vodafone’s performance in the UK, which accounts for only 10 per cent of its business, has been weak for years but improved in the 12 months to March, with earnings growing more than 10 per cent.

The group’s share price rose 6 per cent on Tuesday after it said it would not cut its dividend. Rivals including BT and Orange have reduced dividend payments in recent weeks. Vodafone cut its payout last year to reduce debt, which stood at €42.2bn at the end of the year.

The telecoms company increased revenue by 3 per cent to €45bn in the full year and reported a pre-tax profit of €795m, compared with a €2.6bn loss in the previous year, when a large write-off in the value of its Indian unit was booked. Its adjusted earnings before interest, taxation, depreciation and amortisation — the metric against which it provides guidance — grew 2.6 per cent to €14.9bn.

The London-based company said it expected adjusted ebitda to be flat or slightly down this financial year due to the uncertain economic outlook and a reduction in roaming profit of about €500m due to lower tourism and business travel.

Vodafone expanded its European customer base to 65m mobile users and 25m broadband customers in the year to March.

The company is finalising the separation of its European towers business ahead of a potential float or stake sale. Mr Read said that could still take place next year and pointed to the sale of an 8 per cent stake in Inwit, its tower joint venture with Telecom Italia, last month as proof that investor demand remained strong despite the coronavirus emergency.