TheChek News Flow

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 U.S. equity futures declined and a rally in Asian stocks faded as traders mulled a grim milestone in the coronavirus outbreak which showed continued signs of damage on economies and companies.

Crude oil pared Thursday’s 22% jump, which came after President Donald Trump said Russia and Saudi Arabia would cut production. Stocks sank in Australia and Hong Kong, while South Korean shares fluctuated. Early gains in Japan gave way to losses, while S&P 500 futures fell about 1%. The new coronavirus has now infected 1 million people across the world, just four months after it first surfaced. The yen fluctuated and the euro retreated.

US After Hours TSLA +17.1% jumps on Q1 production update; FATE +22.2% jumps on clinical news and JNJ deal; TGT to start metering guests

Nikkei -0.77% Hang Seng -0.85% CSI -0.55% Shanghai -0.59% Shenzen -0.31%

Eur$ 1.0848 CNH 7.0991 CNY 7.0872 JPY 107.86 GBP 1.2382 CHF 0.9738 RUB 77.4854 TRY 6.6490 WTI$ 24.06 -4.98%

S&P -1.38% Nasdaq -1.08% EuroStoxx -0.15% FTSE -0.85% Dax -0.07% SMI

Macro :

- Goldman Warns S&P 500 Profits May Fall 57% If Worst-Case Strikes

- Uber, Lyft Ride Rev. Down by 50% vs Last Year: The Information

- The World Just Hit 1 Million Coronavirus Infections

- Germany’s Scholz Willing to Offer Italy Quick Financial Aid

Keep an eye on :

- AC FP : Accor: Pandemic to Have Major Repercussions on 2020 Performance

- ADS GY : Adidas Is Said to Seek More Than 1 Billion Euros of State Aid

- AMS SM : Amadeus to Sell EU1.5b in Stock and Convertible Notes: Terms

- APGN SW : APG SGA Cancels FY Dividend of CHF11 Per Share

- AAPL US ; Apple Tells Staff U.S. Stores to Remain Closed Until Early May

- BEI GY : Beiersdorf Pulls FY 2020 Guidance; Prelim 1Q Comp Sales -3.6%

- BMPS IM : Monte Paschi Outlook Lowered to Negative at DBRS Morningstar

- BNP FP : BNP Paribas Fortis Withdraws EU3.53/Share Dividend Proposal

- IAG LN British Airways, Unite Reach Deal Over Virus Crisis, Union Says

- IAG LN : IAG to Cut Capacity By About 90% in April & May

- COPN SW : Cosmo Full Year Pretax Loss EU21.3 Mln, +22% Y/y

- DAI GY : Daimler Signs EU12B Loan Facility Agreement

- DBK GY : Trump Organization Asks Deutsche Bank For Loan Payment Delay

- GN DC : GN Withdraws 2020 Guidance, Postpones Share Buybacks

- HMB SS : *Hennes & Mauritz: Online Sales in March 2020 Increased by 17% in Local Currencies, At 31 March, 3,778 of 5,065 Stores Were Closed, China Demand Has Gradually Started to Recover, Most of Group's Stores Re-Opened

- ITF FP : Interparfums Withdraws 2020 Earnings Guidance

- INTU LN : Intu Says It Won’t Waive Rents for Tenants Who Can Pay: City AM

- KOA NO : Kongsberg Automotive to Fund Liquidity Need Through Debt, Equity

- LHA GY : Lufthansa Bailout Size Hinges on Germany’s Ticket Refund Appeal

- NMC LN : U.A.E. Central Bank Said to Hire A&M to Advise on Finablr Unit

- NOVN SW : Novartis, Incyte to Start Phase III Jakavi in Covid-19 Patients

- RCO FP : Remy Cointreau Warns on 2019/20 Current Operating Profit

- RR/ LN : Rolls-Royce: Ako Capital Has 5.21% Voting Rights Via Derivatives

- RRTL GY : RTL Group Withdraws Outlook for 2020 & Div Proposal for 2019

- RWE GY : Dutch Govt Seeks to Cut Coal-Powered Energy: NOS (April 2)

- SAN SM ;Santander Cancels 2019 Final Dividend, Reviews Future Policy

- O2D GY : Telefonica Deutschland Names Peter Loescher New Chairperson

- 8TRA GY : Traton Seeking M&A, Strategic Partnership Opportunities: WiWo

- UCG IM : UniCredit Reaches Deal With Unions on 5,200 Italy Job Cuts

- UNI IM : Unipol Suspends Dividend Proposal

- UPM FH : Finland’s UPM to Continue Uruguay Pulp Mill Project: President

- UK LN : Ahl Boosts Short Position in Virgin Money UK to 0.90%

* Aena Raised to Hold at Ahorro Corporacion; PT 121.70 euros

* Carlsberg Well-Placed to Ride Out Coronavirus Impact: Jefferies

* Picture Not as Bad as Feared for S. European Banks: Jefferies

* Remy Warning Likely to Weigh on Stock, Citi Says; Watch Pernod

Pitti Uomo Postponed to September, Mido is Canceled

The Florence-based trade show will run Sept. 2 to 4 while the eyewear event will be held in February 2021.

NEW SCHEDULE: Pitti Immagine has reshaped its packed schedule of trade shows in light of the coronavirus emergency.

Following Camera della Moda Italiana’s decision to postpone the upcoming Milan Men’s Fashion Week to September, Pitti Immagine rescheduled the 98th edition of the Pitti Uomo men’s wear trade show to run from Sept. 2 to 4 at its usual Fortezza da Basso location in Florence. The event was originally slated for June 16 to 19.

Dates for the other trade shows operated by Pitti Immagine were also changed, including the children’s wear-focused Pitti Bimbo fair now running Sept. 9 to 10. Dedicated to spinners, Pitti Filati has been confirmed but new dates have yet to be decided.

“In these weeks we have been constantly and closely in touch with Italian and international manufacturing companies and all the other players operating in the textile-clothing industry, including organizations such as Confindustria Moda and Camera della Moda Italiana,” said Pitti Immagine’s president Claudio Marenzi. “The request emerged to keep all the leading events as the Pitti ones, which will be essential tools to gradually restart the entire commercial machine of the fashion system. And that’s what we will tirelessly work on in the next months.”

“Obviously these will be exceptional editions, where our main goals will be to guarantee the complete sanitization of the exhibiting space and to rearrange set-ups in a way that’s safe for people,” echoed Pitti Immagine’s chief executive officer Raffaello Napoleone, adding that these measures might be replicated also in the future.

Napoleone revealed that organizers are implementing “Pitti Connect,” a more advanced version of its existing digital platform that will help promote the shows and aid exhibitors.

In addition to the digital tool, better economic conditions could facilitate the overall attendance to the shows. “The companies exhibiting and buyers underscored the importance of extraordinary economic measures, such as non-repayable grants or facilitated loans, that could encourage their participation to the upcoming international events,” said Pitti Immagine’s vice president Antonella Mansi. “The government is discussing about [introducing] additional packages to support businesses and we commit to forward our suggestions to the Ministry of Foreign Affairs…and to Confindustria.”

Pitti Immagine’s food-and-wine Taste trade show and the inaugural edition of the Testo event dedicated to the Italian publishing industry have been canceled and will run in 2021.

Separately, the annual edition of the Mido eyewear trade show has also been rescheduled for next year. After being postponed to July, the Milan-based fair is now slated to run from Feb. 6 to 8 at the Rho-Fiera fairgrounds.

The new dates are slightly moved up compared to the usual timing of the event running at the end of February. “This is an important decision, which we were planning to announce during the event this year,” said Mido’s president Giovanni Vitaloni. The change “could offer a further boost to the Italian and global eyewear business,” he contended.

Meanwhile, Mido’s organizers also implemented the “Mido4U” digital platform to enable exhibitors and industry’s operators to continue to interact with each other.

Investor appetite returns for junk bonds

Funds attract record inflows over past week to end five-week spell of outflows

Junk bond funds attracted record inflows in the week ending Wednesday as investors begin to show renewed appetite for riskier corners of the credit market.

Mutual funds and exchange traded funds that invest in junk bonds had $7bn in inflows, the biggest-ever weekly sum, ending a five-week run of outflows. The inflows were led by a record $5.9bn flowing into funds that invest in US junk bonds, according to EPFR Global data. 

The inflows come after a wave of global central bank and government stimulus, strong appetite for new deals and the rising price of oil, which helps the energy companies that make up a big chunk of the junk bond market.

“There is hunger for high-yield,” said Quincy Krosby, chief market strategist for Prudential Financial. The inflows show that investors believe the Federal Reserve’s plan to buy billions of dollars in investment grade credit will have an impact on the junk bond market. “You can see the effect of the Fed’s action on the investment grade market. There is a hope that the high-yield market moves in the same direction,” Ms Crosby said.

Yum Brands, which owns the fast food outlets KFC, Taco Bell and Pizza Hut, who are all facing a hit from the slowdown, ended a dry patch of junk bond deals this week with an offering that was several times subscribed. The strong demand prompted the company to increase the size of the offering by $100m to $600m.

The inflows come as the yield junk debt commands above equivalent US government bonds, known as the credit spread, eased to 9.1 percentage points on Wednesday, down from a high point for the year of 10.1 percentage points hit late in March, according to the ICE Bank of America High Yield bond index.

The junk bond inflows show investors are “dipping their toes back in the water,” said Kevin Lorenz, a portfolio manager at Nuveen Asset Management, which runs a high-yield bond fund that has lost 19 per cent this year, according to Morningstar, largely due to its energy holdings.

“An awful lot of the bad news is priced into the market but we would not want to wager that we have hit the lows,” Mr Lorenz said.

Money market funds attracted $194bn for the week, down from a record high the week before, while US equity funds had $4.8bn in inflows, partially reversing the $15.8bn in outflows over the previous week.

Dividends: the sacrosanct payments under heavy fire

Companies face difficult choice over whether to persist with payouts that retirement funds rely on

If bankers’ pay was the lightning rod for political anger during the financial crisis, company dividends are rapidly assuming a similar role in the coronavirus outbreak.

Those governments hurriedly assembling economic rescue packages have made clear that any company wanting to use them must stop payouts to shareholders. European and UK regulators this week extended the message to banks, telling lenders that their financial firepower should be used to support economies.

The mushrooming concern over how companies use their cash partly reflects the sudden and devastating damage that efforts to contain the outbreak have inflicted on workers. In the US alone, the number of people claiming unemployment benefits has soared to a record 6.6m.

Sue Noffke, head of UK equities at Schroders, one of Britain’s largest listed asset managers, said there is increasing public pressure for companies to scrap dividend payments.

“For investors and company management, dividends have a very dear place in the investment rationale and the business cases for companies,” said Ms Noffke. “But these are extraordinary circumstances.”

Indeed, the first major pandemic since the Spanish flu of 1918 has already prompted plenty of companies to take their own steps to strengthen their balance sheets.

Mining group Glencore, aeroplane manufacturer Boeing and carmaker Ford are among the 39 per cent of the 307 European and North American businesses tracked by SquareWell Partners, a shareholder advisory firm, that have slashed, postponed or cancelled their dividends.

For Thomas Schuessler, co-head of equities at €767bn asset manager DWS and portfolio manager of DWS Top Dividende, axing those payments is a “logical consequence” for companies facing a “severe earnings collapse”.

“In times like these, where the corona outbreak has paralysed the economy, it is not surprising that several companies might not be able to pay dividends,” he added.

A survey by Boston Consulting Group of US 150 investment companies that together manage $7tn in assets found that 59 per cent were comfortable with companies not maintaining dividends in near-term.

If some asset managers are stoic about losing the income stream that dividends provide, a famine in payments will have a painful effect for many parts of the investment universe.

So-called income funds, which target stocks offering rich and reliable dividends, have been battered in recent weeks. The casualties include large funds such as Invesco High Income, run by Neil Woodford’s former protégé Mark Barnett, which has lost 36 per cent this year. Artemis Income, one of the UK’s biggest equity funds, is down by 27.5 per cent. 

At the same time, the freeze on dividends also hurts pension funds, charities and other savers, who rely on the steady income from their investments.

“There are charities and foundations and pensions that need that income to keep operating,” said Sebastien Thevoux-Chabuel, a portfolio manager at Comgest, the French asset manager.

Shareholders in HSBC, a company popular with retail investors in the UK and Hong Kong, reacted with fury on Wednesday after the bank was forced by the Bank of England to cancel its dividend.

“The equity investor is the fall guy in any crisis: the owners of the business are the last in the queue to be paid; and even if there are surplus profits, then authorities may now prohibit their distribution,” said Barry Norris, founder of Argonaut Capital, the asset manager.

Eliminating dividends piles “further misery on investors relying on income from dividends to fund their retirement”, he added.

It helps explain why some shareholders believe now is the time for companies to be defending their dividend, according to research by SquareWell, which spoke to 20 big investors with $7.2tn in assets.

And some are. UK oil producer BP this week announced plans to cut capital spending by a quarter as it seeks to safeguard its payout. Rival Royal Dutch Shell is pulling other levers, including fixing a new $12bn credit facility with banks.

Although the survey from BGC found a majority of asset managers were accepting of cuts, just over 40 per cent said that healthy companies should maintain their dividend even if it was at the expense of other uses of cash, such as buybacks and capital expenditure.

It is a view echoed in part by Mirza Baig, global head of governance at Aviva Investors, the £356bn UK asset manager. Companies that do want to maintain payouts, he argues, will need to be able to demonstrate that their balance sheet is “robust enough” to sustain them.

“We want companies to make responsible capital allocation decisions based on a prudent view of cash flows for an extended period of time,” he added.

But with swaths of the world’s biggest economies in lockdown and no certainty over when the virus will be tamed, decisions over whether to maintain dividends — even for currently robust companies — become more fraught.

According to research from broker Peel Hunt, there are 40 dividend payments that have recently happened or are due in coming weeks from FTSE 350 and AIM 100 companies. The utilities and oil and gas sectors account for the largest chunk.

What few dispute is that the wave of cuts, cancellations and suspensions will grow. 

The dividend futures market, which is used to bet on the size of future payouts, is anticipating cuts across Europe of 60 per cent, almost double those during the financial crisis, according to Citigroup research cited by Argonaut Capital.

In the US, expectations for cuts from America’s biggest companies have leapt by a third in the past month, according to S&P 500 Dividend Futures market.

Even if shareholders’ pessimism over the prospect for dividends is deepening, Mr Thevoux-Chabuel of Comgest believes some companies have reduced dividends not because they need to, but because they believe it would be a “risk to their image” at a time of economic turmoil.

European low-cost carrier easyJet drew criticism for proceeding with a £175m payout last month to shareholders despite grounding its entire fleet.

“We really want companies to be really clear about the reasons for cutting or maintaining the dividend,” said Mr Thevoux-Chabuel.

It is an increasingly hard task for companies around the world.

Condoms and sex toys in demand from social isolators

Sales are soaring but supply chain disruptions mean shortages loom

The coronavirus shutdown has brought swaths of the global economy to a standstill, but for producers and purveyors of condoms and sex toys, business is booming. 

Ritex, Germany’s largest domestic producer of prophylactics, saw sales nearly double in March. The company, which is based in the north-western town of Bielefeld and is still operating, said its sales of condoms last month doubled compared with the same period a year ago, to 12.7m.

The same trend is happening in other countries. Ann Summers, the British lingerie chain, said sex toy sales last week were up 27 per cent over last year. Its best-selling item was the Whisper Rabbit, which it markets as its quietest vibrator.

“Customers are placing increasing importance on noise while they have a full household,” the company said. 

Across the world, the coronavirus pandemic has halted social life. Shops have been closed, football matches postponed and bars and clubs shut. Strict social distancing rules in Germany and elsewhere mean gatherings of more than two people are banned.

Axel-Jürg Potempa, a German sexual health specialist, said he predicted a coronavirus-related baby-boom by Christmas.

“The crisis creates new, additional bonds,” he said. Fear of Covid-19 was prompting a flood of adrenalin and a subsequent “dopamine rush” in many, which “increases desire and libido”, he told the Berliner Kurier. 

Robert Richter, Ritex’s managing director, said the rise in condom sales was partly explained by panic buying after curbs on social contact were introduced last month, with Germans hoarding essentials such as toilet paper and hand sanitiser as well as prophylactics.

But there was also an emotional reason, he added. “In a crisis, when you’re isolated, you seek more emotional intimacy with your partner, and sex is part of that,” he said. “And that might well lead to more condom use.”

Dildo King, a Berlin accessory supplier, said it had seen an 87 per cent increase in sales of sex toys year-on-year since the restrictions were announced. Fetish article sales were up 94 per cent and sales of one particular product had increased more than eightfold compared with last year.

“We are doing incredibly well out of this crisis, but I'm not exactly jumping for joy,” said Raiko Spörck, managing director. “People are dying, and no one's happy.”

The company was now having trouble procuring stock, he said: “The producers weren't prepared for such an onslaught.”

Eis.de, another leading German online retailer of sexual accessories, said orders had doubled since Germany introduced social restrictions: on March 23 it saw the biggest sales volume in its history.

There had been a 300 per cent increase in sales of aids for men and women in the southern state of Bavaria, and a 3,000 per cent increase in demand for fantasy nurse costumes, the company said. Sales of jumbo packs of condoms, each containing 100, had risen fivefold.

However, as in all areas of business, Covid-19 has interrupted supply chains.

Karex, which makes one in five condoms globally, had to shut down its three factories in Malaysia for 10 days last month as authorities imposed strict curbs on large gatherings to slow the spread of the illness. 

The company was able to win an exemption from the lockdown rule late last week, arguing that it was a producer of essential medical goods, and restarted the plants last Friday. But they are still only running at 50 per cent capacity.

“We are going to be facing a global shortage of condoms,” Goh Miah Kiat, Karex’s chief executive, told the Financial Times. “Karex alone has produced 200m fewer units as a result of the restrictions — it’s really impacting our production.”

He said that other big condom-makers in China and India were also experiencing shutdowns, which would have further repercussions for global supply. 

Karex provides large numbers of condoms to international organisations such as the World Health Organization and the United Nations Population Fund (UNFPA), which use them as part of a campaign against HIV and other sexually-transmitted diseases in places such as sub-Saharan Africa.

“The WHO has said that condoms are the best way to prevent the spread of HIV, so any shortage is going to be painful,” Mr Kiat said.