England takes next step on road to new normal

4

Please forward this newsletter to friends and colleagues who might find it valuable. Even if they are not subscribers to the Financial Times, they can read the newsletter — and all of the FT — free for 30 days. And if this has been forwarded to you, hello. Welcome and please sign up here 

Get the latest worldwide picture with our vaccine tracker

Latest news

  • UK drug company GlaxoSmithKline said it would support production of up to 60m doses of the Covid-19 vaccine developed by US rival Novavax

  • The World Health Organization said coronavirus probably came from bats to humans through another animal, and that a lab leak was ‘extremely unlikely’ to be the cause

  • The ban on evicting US housing tenants for missing rental payments has been extended until the end of June

For up-to-the-minute coronavirus updates, visit our live blog

Successful vaccination campaign reflected in economic data

With a message from Prime Minister Boris Johnson urging the public to act sensibly, England took another step on the long path back to normality today with the lifting of a swath of coronavirus restrictions and the end of the unprecedented order to “stay at home”.

There is a long way to go before the target date of June 21 when, virus data permitting, the last restrictions are set to be lifted, but a successful vaccination campaign has already given a shot in the arm to the government’s standing — despite its record as one of the worst-hit countries for Covid-19 deaths and criticism over the billions spent on its test and trace programme. 

The economic boost from the vaccine rollout has been evident in better than expected economic data and hopes of a return to normal output even sooner than the recently upgraded forecast for the third quarter of 2022.

Column chart of Citigroup CESI index (positive = above expectations) showing data have been better than expected

The euphoria is in stark contrast to many other parts of the world which are still suffering badly from the pandemic.

In mainland Europe, hospitals are at “breaking point” with Germany, France and Poland reporting soaring infection and death rates, particularly from the B.1.1.7 strain of the virus, while criticism of the EU’s vaccine programme continues. German chancellor Angela Merkel today raised the prospect of nationwide curfews as she blasted regional leaders for reopening too soon.

India, which has vaccinated just 4 per cent of its population, today reported its highest number of cases in four months while infections are on the rise everywhere from the United Arab Emirates to South Korea and the Philippines. Even countries with generally good vaccination rates such as the US are not safe, with New York state experiencing a surge in cases.

Visit the FT lockdown tracker to compare government responses around the world

Global economy

UN chief António Guterres warned of a post-pandemic debt crisis in the developing world ahead of launching proposals to help low and middle-income countries, including new finance from the IMF. The fact that only six countries defaulted on their foreign debts last year — Argentina, Belize, Ecuador, Lebanon, Suriname and Zambia — had created the “illusion” of stability, he argued.

French president Emmanuel Macron’s suggestion that the EU expand its €750bn rescue package — at present subject to a legal challenge in Germany — has been boosted by the much bigger US $1.9tn stimulus, says our Brussels Briefing newsletter. Paschal Donohoe, president of the eurogroup and Ireland’s finance minister, argues in the Financial Times that the comparison with the US misses the point, with the bloc focusing on saving jobs rather than handing out cash to individuals.

Tourism in Europe could be devastated by a “second lost summer” as vaccine programmes get off to a slow start and infections continue to rise. Spain and southern Europe have been particularly badly affected. One hotel owner in Mallorca said: “If I was offered just half of the business we had in 2019, I would say: ‘Where do I sign?’” Watch our video on lessons from the EU vaccine rollout.

Loss in Mediterranean countries’ economic activity, Q3 2020 compared with Q4 2019 (%)

Business

The stock market debut of Deliveroo on Wednesday is set to be London’s biggest initial public offering in a decade, but the food delivery company today cut its pricing target to the £3.90 to £4.10 range, citing “volatile” trading conditions. Some big investors are shunning the sale because of worries over the company’s working practices and shareholder structure.

The UK government is considering “Covid-19 certificates” for offices and factories, which would let businesses ignore social distancing as companies fret about the employment law consequences of the return to work. Such certificates would allow proof of antibodies or recent testing as an alternative to evidence of vaccination.

The trend towards online shopping accelerated by the pandemic has left traditional retailers such as UK-based John Lewis grappling with the problem of what to do with its estate. Hopes formed after the financial crisis that stores and ecommerce would grow together have been dashed as the latter spread deeper into existing sectors such as electronics and more widely into fashion and beauty, hitting high streets and shopping malls hard.

John Lewis’s stores in shopping centres and on the high street have been hit hard; average change in footfall each year between 2008 and 2020 by destination type (%)

Markets

An increasing number of US companies are fretting about the potential return of inflation as supply chain problems and the cost of raw materials begin to hurt. Global finance correspondent Robin Wigglesworth argues, however, that investors should not be too scared of the inflation bogeyman, or at least not yet.

Line chart of regional Federal Reserve banks surveys on raw materials prices showing that manufacturers are seeing inflationary pressures on the horizon

Falling bond prices and the accompanying rise in yields are good news for deficit-prone pension funds, writes columnist John Plender, but the market tumult has thrown up questions about how pension scheme liabilities should be calculated, he argues.

The latest in our Charts that Matter series shows the 75 per cent rebound in the S&P 500 index of key US stocks, kickstarted by the Fed and boosted by President Joe Biden’s recovery plan, was the biggest bounce back since 1936.

US stocks mark their best 12 months since 1936

The essentials

Stories of excessive hours worked by young Goldman Sachs staff during the pandemic have shone the spotlight on burnout in financial and professional services companies. Read some of our readers’ thoughts on the topic and contribute to the debate.

Have your say

Butterfly comments on UK festivals warn of cancellations unless government underwrites insurance:

There is a high chance the concerts do not go ahead. There are new variants out there that the vaccine may be less effective on. What message will the government be sending by underwriting these events? That everything will be great this Summer and we can all go party like crazy? And if they do, they are singling out a specific industry: should it be this one? Yes it brings happiness to people [but] doesn’t have a lasting impact on the economy. There is not a bottomless pit of money to dole out. This has to be a considered response.

Final thought

Overachiever Dr Merritt Moore is not only a successful physicist but a professional ballet dancer. The “quantum ballerina” has now combined her two passions by duetting with an industrial robot on stage. You can watch the pair perform here.

We would really like to hear from you. Please send your reactions or suggestions to [email protected]. Thanks

View original post