Global Business Daily: Tesla, Irish elections, Oscar winners = box office losers?
Patrick Atack in London
"It seems that we have now a three-party system … and that is going to make forming a government quite difficult."
From leader of the country, to uncertainty over his own seat in the Dáil Éireann (Irish parliament)... its been a rocky weekend for Leo Varadkar of Fine Gael – and that's how he reacted to the news that Ireland's two-party center-right status quo was shattered.
The full results will take a long time to surface and many negotiations must take place before a new government is formed, but the markets have already given some reaction, with Bank of Ireland and AIB losing share value.
The other big news today is the reaction to the coronavirus outbreak, which has now led to Amazon and Sony joining LG in confirming their absence from the Mobile World Congress this month. We hear from David Carrington, virology expert at St. George's Hospital, in today's video. He talks about the importance of hygiene basics such as having clean hands.
Tesla could be eyeing a big move to Europe, as Germany's finance minister Peter Altmaier hinted Elon Musk's firm could qualify for subsidies if it locates research and development facilities in the nation, along with battery and car production.
And as it was Oscars time over the weekend. We've taken a look back at the past decade of winners to see if their critical success translated into box office takings.
Finally, please do keep spreading the word – if your colleagues are sick of you mentioning Global Business Daily, you can remind them the mentions wouldn't be needed if they too got our headlines direct to their inbox!
Digital business correspondent
Closures and slowdowns stemming from the coronavirus outbreak continued this week, with Amazon and Sony pulling out of the Mobile World Congress in Barcelona. In China, Airbnb has suspended all bookings made in Beijing for the remainder of February. Volkswagen, BMW, Toyota, Nissan, Honda and Hyundai are among the firms to close factories, though Foxconn, which produces Apple products, has reopened its plant.
Luxury car manufacturer Daimler will likely accelerate budget cuts, and will cut as many as 15,000 jobs, according to German financial newspaper Handelsblatt.
Italian investment firm Exor, which controls Fiat-Chrysler, is in talks with French cooperative insurer Covea over the possible sale of reinsurer PartnerRe. It is understood the transaction may be worth as much as $9 billion. The move would allow Covea to diversify its business in France amid potential tightening of regulations and falling profits from market moves.
Tesla could receive state subsidies if it chooses to open a so-called "gigafactory" in Germany, according to finance minister Peter Altmaier. The Berlin government has marked support for investment in electric vehicles and their production as a way to pivot from fossil fuels and secure manufacturing jobs. "There needs to be research and development, too. All companies that fulfill these criteria have a chance to be supported – including Tesla," Altmaier said.
India-based ride-hailing app Ola has launched in London, and is hoping to take advantage of a gap in the market that may or may not be left by Uber. The U.S.-brand is operating under threat of losing its license, after it was suspended in 2019 over safety concerns.
A new "foldable" mobile phone is coming to market. Revealed during the Oscars ceremony in an advert aired on U.S. television, Samsung's Galaxy Z Flip series will open vertically, unlike the Galaxy Fold, which opens like a book and was unveiled in 2019.
Bank of Ireland and AIB were both losers as Irish election results trickled out. Left-wing Sinn Fein has recorded its best result in the Irish Republic since before World War Two and Ireland's biggest banks' stocks suffered as the market registered reactions on Monday.
"China has a big demand for products from Europe. That's one of the reasons we're seeing one of the big slowdowns in European manufacturing"
As businesses continue to feel the knock-on effects of the novel coronavirus outbreak, Jasper Lawler, head of research at London Capital Group, told us how the markets have reacted so far and what we should expect from big brands they report earnings and revenues.
China's gone back to work after the longer-than-usual Spring Festival. How have markets been reacting?
Well, I'll say it's not too positive for the most part. It's ok in China, because there have been some efforts by the central bank to offer very cheap loans to banks in the areas affected by the coronavirus. So there are some mitigating factors specifically in China –the government offering support, essentially.
But elsewhere in Asia, we're watching the spread of this virus outside China... a number of cases in Britain, there's concern about that. Markets actually had a pretty good week last week, despite these difficult headlines. There was a sense that maybe we turned a corner on the virus. I think we're seeing a little bit more pessimism in general in markets today, a little bit of a concern that this could suddenly escalate out of control again.
It seems that other market news data, for example, is taking a bit of a backseat. Talk us through the potential global economic impact the coronavirus is having?
Well, yes, precisely, I mean, when you think about financial markets, they're forward-discounting mechanisms. They're thinking about what the data is going to be six months to a year in advance. And so even though the data that we're seeing at the moment generally tells us there is a bit of recovery going on, we don't know whether to really believe that recovery has any legs, because there should be such demand destruction potentially.
But the question then is, how has it affected the rest of the world? China has a big demand for products from Europe. That's one of the reasons we're seeing one of the big slowdowns in European manufacturing and, of course, a big demand for commodities worldwide. We're seeing commodity markets really slump.
You mentioned European manufacturing, but a slew of companies around the world have warned about the impact of shutting down factories and the ripple effect that's having across their supply chains. Do you think that the worst economic drag is over?
We don't know for sure yet – and you have to be a little bit cautious with company guidance.
What they like to do is guide lower and then beat those expectations when the actual results come out.
And, obviously, the coronavirus is a real threat, and it's a very convenient thing for companies to mention as a downwards threat to their earnings and their expectations come down. They've become that much easier to beat when actual earnings season comes around. It's going to affect some companies more than others, obviously. And though those companies with supply chains in China, those companies with heavy demand for their products and services in China, I would suspect are the most most likely to be hit.
And that's why we've seen shares of luxury goods manufacturers, for example, really be severely curtailed in this recent outbreak of the virus, because of that likely falloff in demand from China. We haven't seen quite the same thing from the likes of Apple. I mean, the shares have been hitting record highs recently. So not really pricing in the potential damage that this had.
We know that Foxconn, the Apple factory that manufactures most of the iPhones, is reopening today, so that's a good thing. But we've nonetheless had a few weeks where production has been off and we don't know if that's going to affect the ability of Apple in China and elsewhere to actually deliver the phones and the products to people.
You talk about companies having a tendency to underpromise so they can overdeliver, when the reporting season is in full swing. We've got big names like Ali Baba, Nissan, Nestlé... can we expect some more Coronavirus disclaimers?
Absolutely. I mean, Alibaba obviously front and center as a Chinese company. You would suspect that it's going to feature pretty heavily in their guidance. There are well-diversified multinational companies these days based in China. So some areas of their businesses are going to be affected more than others.
But, nonetheless, I think it would be remiss of them not to mention that the coronavirus is likely to affect their next set of results. But it gives them the opportunity to present some good results, but at the same time warn that things may be going to disappoint moving forward.
The stock market investors pay attention to not necessarily what's happening now, but what's going to happen in the next couple of quarters. And we're looking at downside risks instead of upside risks to earnings. And so that's the potential drag on the stock market moving forward.