The hacker group blamed for this weekend’s ransomware attack on the Colonial petroleum pipeline has insisted it only wanted to make money and regretted “creating problems for society”. In a statement posted on Monday, the criminal group known as DarkSide said it was “apolitical” and attempted to deflect blame for the attack on to “partners” that had used its ransomware technology. The hack has taken a key US oil pipeline offline for three days, threatening to drive up fuel prices and forcing the US government to bring in emergency powers to keep supplies flowing. “Our goal is to make money, and not creating problems for society,” DarkSide said, adding that it would “check each company that our partners want to encrypt to avoid social consequences in the future”.Ransomware attacks involve hackers taking control of an organisation’s data or software systems, locking out the owners using encryption until a payment is made. DarkSide emerged as one of the leading ransomware outfits last August, and is believed to be run from Russia by an experienced team of online criminals. Silicon Valley-based cyber security company CrowdStrike has traced DarkSide’s origins to the criminal hacking group known as Carbon Spider, which “dramatically overhauled their operations” last year to focus on the fast-growing field of ransomware. “We are a new product on the market, but that does not mean that we have no experience and we came from nowhere,” DarkSide has said previously. Brett Callow, an analyst at the cyber security group Emisoft, said: “DarkSide doesn’t eat in Russia. It checks the language used by the system and, if it’s Russian, it quits without encrypting.”He added that the group rented out its services on the dark web. “DarkSide is a ransomware-as-a-service operation. I assume the attack on Colonial was carried out by an affiliate and the group is concerned about the level of attention it has attracted.”In a sign of how ransomware has become a professionalised industry, DarkSide operates its own “press office” and claims to have an ethical approach to choosing its targets. DarkSide’s website claims that “based on our principles”, it will hold off from attacking medical institutions such as hospitals, care homes and vaccine developers; the providers of funeral services; schools and universities; non-profits and governmental organisations. That stands in contrast to the rest of the ransomware industry, for whom healthcare providers and the public sector are among the largest targets. Colonial Pipeline is a private company owned by investors including Shell, KKR and Koch Capital. IT security firm Kaspersky said DarkSide aimed to “generate as much online buzz as possible”. “More media attention could lead to more widespread fear of DarkSide, potentially meaning a greater chance the next victim will decide just to pay instead of causing trouble,” Kaspersky researcher Roman Dedenok said in a recent blog post. Its previous targets reportedly include property group Brookfield, Discountcar.com, a Canadian subsidiary of car rental group Enterprise, and CompuCom, a US-based IT support provider owned by the parent company of Office Depot.
Arete, which provides incident response services to victims of cyber crime, has found that DarkSide most commonly targets professional services and manufacturing companies, with its ransom demands ranging between $3m to $10m, though the security news side Bleeping Computer has found evidence of smaller ransoms in the hundreds of thousands of dollars too. In an email interview with security blog DataBreaches.net, a DarkSide representative calling themselves “DarkSupp” said that the outfit researched how much their target might be able to pay — for instance, by looking at their insurance coverage — before deciding how much ransom to demand. “We only attack companies that can pay the requested amount,” DarkSide has said previously. “We do not want to kill your business.”According to screenshots from one victim published by Bleeping Computer, DarkSide sends each target a clear list of instructions entitled “Welcome to Dark”. Specific details and samples of the stolen data are presented and victims are warned that these will be automatically published online for at least six months if they refuse to pay. This technique of both locking victims out of their systems and also threatening to embarrass them by making the stolen data public is known as “double extortion”. The DarkSide hackers also try to reassure their victims that they will play by their own rules, saying: “We value our reputation. If we do not do our work and liabilities, nobody will pay us.” It even offers to provide technical support, “in case of problems” using the decryption tool that their victims receive when they pay up. Ransomware attacks jumped 62 per cent last year according to firewall developer SonicWall, including more than 200m hits in the US. That was partly driven by the pandemic, as businesses forced to flee the office grappled with the task of securing their remote employees, as well as the rise of bitcoin, through which many hackers demand payment. A recent survey by insurance group Hiscox found that more than half of those targeted by ransomware pay up.
Iron ore prices jumped more than 10 per cent in Asia trading on Monday on growing expectations that the global economic recovery from the Covid-19 pandemic would extend beyond China and buoy commodities markets.Futures prices for iron ore in Singapore rose to more than $226 a tonne, a record in dollar terms. In Dalian, China’s main commodities trading hub, the price of the most active futures contract was also up 10 per cent.The price rise followed a run of recent highs for the steelmaking ingredient, which alongside other raw materials has been supported by strong demand from a rapidly recovering Chinese economy, and is also expected to benefit from government support measures around the world. The physical iron ore price has hit a record of almost $230 a tonne on Monday, according to S&P Global Platts. That in turn has boosted the share prices of large iron ore producers including Rio Tinto, whose shares powered to a record high £67.05 on Monday. Big producers such as Rio only require a $50 a tonne to break even.“It’s more than just China now . . . it’s the whole strength of recovery in the steel industry globally,” said Justin Smirk, senior economist at Westpac. “I think the reality is the market’s still incredibly tight, we’ve still got very, very strong steel prices.”In China, the price of steel reinforcement bars — widely used in the construction industry — have risen to $865 a tonne, up from $660 a tonne at the start of the year. “These are record price levels and surpass the highs seen in the pre-2010 boom period,” Clarksons Platou Securities wrote in a note to clients.Chinese steel production leapt 19 per cent in March despite Beijing’s efforts to crack down on production as the government strives to meet its environmental targets.China’s imports have risen on the back of its appetite for raw materials, alongside a jump in its exports. Data released on Friday showed imports grew 43 per cent in April year on year, though that was partly because of a low base last year when the pandemic hit global trade. The robust recovery of China’s economy, which returned to pre-pandemic growth rates at the end of last year, lost some momentum in the first quarter. Iron ore imports in April fell compared with March.
Iron ore trade exports from Australia to China have come under scrutiny on the back of geopolitical tensions that have resulted in tariffs on shipments such as barley, beef and wine. As a result, Chinese mills are scrambling to lock in supplies of Australian ore.Colin Hamilton, analyst at BMO Capital Markets, said Monday’s surge in Singapore and Dalian had been triggered by concerns that bank funding for Australian iron ore in China may be harder to come by in the coming months “given the current geopolitical tension between the countries”. “We would not be surprised to see suggestions of a temporary pause in purchases from the Ministry of Industry and Information Technology or China Iron and Steel Association . . . and we expect more Chinese rhetoric around prices being too high over the coming days.”Michael Lovecchio at brokerage StoneX speculated about whether the iron price jump could be attributed to underlying market demand, “Chinese/Australian tensions getting worse” or “simply Chinese retail speculation”.Raw materials in China have pushed producer prices higher this year, with data released on Tuesday expected to show a jump of more than 6 per cent. China recorded negative PPI in the time between the emergence of the pandemic last year and the start of 2021.Warren Patterson, head of commodities strategy at ING, suggested that the prospect of inflation was driving investor demand for commodities.Iron ore is “a real asset, so it’s seen as a good inflation hedge . . . I think that is why we’re seeing a lot of investor money going into commodities”, he said.“We’re definitely getting to levels where I think price action is detaching from the actual fundamentals,” he added.
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BioNTech beat expectations in its first-quarter earnings, swinging to a €1.6bn profit and pledging to invest proceeds from its Covid-19 vaccine in becoming a “powerhouse” in cancer therapies. The German biotech, which has developed its vaccine with Pfizer, forecasts current 2020 contracts to supply 1.8bn doses are worth about €12.4bn. But this could rise further as BioNTech expects to have manufacturing capacity for up to 3bn doses this year.The company has already signed contracts for 2022 with Canada and Israel, and is in talks with other governments eager to prepare for waning immunity or new variants by buying up booster shots. Ugur Sahin, BioNTech’s chief executive, said the world would have “more than enough” vaccines in just nine months as it rapidly expands manufacturing. He said there was “absolutely no need” to waive patents, a proposal recently backed by the US to try to increase distribution of vaccines to developing countries. Sahin said the company’s goal was to build a “21st century immunotherapy powerhouse”, using the messengerRNA technology behind the vaccine for drugs that harness the immune system to fight cancer. BioNTech has started three early stage trials in oncology so far this year and expects to begin three more. It has 14 oncology product candidates in 15 ongoing trials. The company also expects to start dosing participants in a trial of a flu vaccine, developed with Pfizer, in the third quarter.Its Marburg facility in central Germany has the capacity to deliver 1bn doses a year, and the company said it was now contributing more than 50 per cent of the manufacturing of the drug substance worldwide. BioNTech is also expanding internationally, signing a deal with Singapore on Monday to open an office and regional manufacturing facility in the state, and building a plant in China as part of a joint venture with Fosun Pharma. The biotech reported diluted profit per share of €4.39, higher than the average analyst estimate of about €3, for the three months to the end of March. The company made a pre-tax profit of €1.6bn, compared with a loss of €53m in the same period the year before. Total sales were more than €2bn, including the company’s share of the gross profit from the territories where Pfizer sells the vaccine and BioNTech’s direct sales in Germany and Turkey. Shares in BioNTech, which have soared 268 per cent in the past year, were up 8 cent in early trading in New York.
Société Générale plans to shift the focus of its investment bank towards corporate finance and advice as the French lender tries to move away from the kind of trading risks that pushed it to a first full year loss in decades.The company said on Monday it would push “a client-centric strategy”, allocating capital “in favour of financing, advisory and transaction banking” to cut its reliance on more volatile trading flows.The pledge comes after its equity derivatives business, which has been core to the bank’s identity for decades, pushed SocGen to a loss last year after the pandemic forced companies to cancel dividend payments, tearing holes in some of the structured products the bank sold to clients. As a result, SocGen slashed the level of risk being taken by its equity division. It culled top ranks and created new products in an overhaul that sacrificed up to €250m in revenue but should reduce the cost base by €450m by 2023. This part of the business has since rebounded to its best performance since 2015, helping boost SocGen profits in the first quarter and easing pressure for deeper changes.The lender is now going to try to “deliver predictable performance” from its markets business, division head Jean-François Grégoire told investors on Monday.“Last year, impacts from a unique market dislocation led us to review the management of structure products that were clearly too problematic in extreme market conditions,” Grégoire said. “We quickly decided to de-risk.”SocGen said on Monday that its overall global banking and investor solutions business (GBIS), which encompasses both trading and investor funding, will now target return on “normative equity” — the bank’s measure of adjusted returns — of more than 10 per cent from 2023, against about 7 per cent currently. The bank is seeking to achieve average revenue growth of approximately 3 per cent between 2020 and 2023 for the financing and advisory businesses while the markets business is aiming for “stability”.SocGen wants to “normalise” revenues in GBIS at about €5bn in 2023, while targeting a cost base of €5.5bn-€5.7bn in 2023. It stood at about €5.8bn in 2020.“All in, incorporating SocGen’s new target fully would lead to a [roughly] 8 per cent lift to consensus 2023 earnings,” noted analysts at Morgan Stanley.SocGen’s shares were up almost 3 per cent in early afternoon trading in Paris, bringing their gains this year to almost 50 per cent. However, the bank’s share price, at €25.64, is still below the point at which chief executive Frédéric Oudéa took over in 2008, after the Jérôme Kerviel rogue trading scandal.Oudéa’s current term as CEO runs until 2023 and the revamp of the investment bank is one part of a strategy shift that will be key to his legacy.
Old ideas are like old clothes — wait long enough and they will come back into fashion. Thirty years ago, “industrial policy” was about as fashionable as a bowler hat. But now governments all over the world, from Washington to Beijing and New Delhi to London, are rediscovering the joy of subsidies and singing the praises of economic self-reliance and “strategic” investment.The significance of this development goes well beyond economics. The international embrace of free markets and globalisation in the 1990s went hand in hand with declining geopolitical tension. The cold war was over and governments were competing to attract investment rather than to dominate territory. Now the resurgence of geopolitical rivalry is driving the new fashion for state intervention in the economy. As trust declines between the US and China, so each has begun to see reliance on the other for any vital commodity — whether semiconductors or rare-earth minerals — as a dangerous vulnerability. Domestic production and security of supply are the new watchwords.As the economic and industrial struggle intensifies, the US has banned the exports of key technologies to China and pushed to repatriate supply chains. It is also moving towards direct state-funding of semiconductor manufacturing. For its part, China has adopted a “dual circulation” economy policy that emphasises domestic demand and the achievement of “major breakthroughs in key technologies”. The government of Xi Jinping is also tightening state control over the tech sector.The logic of an arms race is setting in, as each side justifies its moves towards protectionism as a response to actions by the other side. In Washington, the US-China Strategic Competition Act, currently wending its way through Congress, accuses China of pursuing “state-led mercantilist economic policies” and industrial espionage. The announcement in 2015 of Beijing’s “Made in China 2025” industrial strategy is often cited as a turning point. In Beijing, by contrast, it is argued that a fading America has turned against globalisation in an effort to block China’s rise. President Xi has said the backlash against globalisation in the west means China must become more self-reliant. The new emphasis on industrial strategy is not confined to the US and China. In India, Narendra Modi’s government is promoting a policy of Atmanirbhar Bharat (self-reliant India), which encourages domestic production of key commodities. The EU published a paper on industrial strategy last year, which is seen as part of a drive towards strategic autonomy and less reliance on the outside world. Ursula von der Leyen, European Commission president, has called for Europe to have “mastery and ownership of key technologies”.Even a Conservative administration in Britain is turning away from the laissez-faire economics championed by former prime minister Margaret Thatcher, and seeking to protect strategic industries. The government is reviewing whether to block the sale of Arm, a UK chipmaker, to Nvidia, a US company. The UK government has also bought a controlling stake in a failing satellite business, OneWeb. Covid-19 has strengthened the fashion for industrial policy. The domestic production of vaccines is increasingly seen as a vital national interest. Even as they decry “vaccine nationalism” elsewhere, many governments have moved to restrict exports and to build up domestic suppliers. The lessons about national resilience learnt from the pandemic may now be applied to other areas, from energy to food supplies.In the US, national security arguments for industrial policy are meshing with the wider backlash against globalisation and free trade. Joe Biden’s rhetoric is frankly protectionist. The president proclaimed to Congress: “All the investments in the American jobs plan will be guided by one principle: Buy American.”In an article last year, Jake Sullivan, Mr Biden’s national security adviser, urged the security establishment to “move beyond the prevailing neoliberal economic philosophy of the past 40 years” and to accept that “industrial policy is deeply American”. The US, he argued, will continue to lose ground to China on key technologies such as 5G and solar panels, “if Washington continues to rely so heavily on private sector research and development”. Many of these arguments will sound like common sense to voters. Protectionism and state intervention often does. But free-market economists are aghast. Swaminathan Aiyar, a prominent commentator in India, laments the return of the failed ideas of the past, arguing that: “Self sufficiency was what Nehru and Indira Gandhi tried in the 1960s and 1970s. It was a horrible and terrible flop.” Adam Posen, president of the Peterson Institute for International Economics in Washington, recently decried “America’s self-defeating economic retreat”, arguing that policies aimed at propping up chosen industries or regions usually end in costly failure. As tensions rise between China, the US and other major powers, it is understandable that these countries will look at the security implications of key technologies. But claims by politicians that industrial policy will also produce better-paying jobs and a more productive economy deserve to be treated with deep scepticism. Sometimes ideas go out of fashion for a email@example.com
The US Environmental Protection Agency has announced a sweeping curtailment of a group of potent greenhouse gases used in air conditioners and refrigerators as the regulator advances revived emissions goals under the Biden administration.The EPA moved to phase down the use of hydrofluorocarbons, or HFCs, by 85 per cent over the next 15 years. It expects its new rule would cut the equivalent of 4.7bn tonnes of carbon dioxide — roughly three years’ worth of US power sector emissions — between 2022 and 2050. “By phasing down HFCs, which can be hundreds to thousands of times more powerful than carbon dioxide at warming the planet, EPA is taking a major action to help keep global temperature rise in check,” Michael Regan, EPA administrator, said on Monday. Congress directed the regulator to reduce HFC output and use in an omnibus bill that passed last year. While the Trump administration rolled back dozens of environmental regulations as part of a deregulatory drive — including delaying the ratification of global deal on HFCs — President Joe Biden has made climate change a priority. Last month, Biden committed the US to cutting greenhouse gas emissions by at least 50 per cent by the end of the decade, from 2005 levels, and he has rejoined the Paris climate agreement. While a handful of states have already introduced measures to reduce HFC use, the EPA rule would propose the first national limit on the chemicals. “This rapid move by the Biden EPA to start phasing down these extremely potent climate pollutants will deliver enormous public health and climate benefits to all Americans,” said David Doniger, senior strategic director at the Natural Resources Defense Council, an environmental group. “Replacing HFCs is a critical and totally do-able first step to head off the worst of the climate crisis.” HFCs are used in refrigeration, air-conditioning, building insulation, fire extinguishing systems and aerosols. They have become increasingly widespread in recent decades as a substitute for a different group of chemicals, chlorofluorocarbons (CFCs), which damage the ozone layer.CFCs were phased out under the 1987 Montreal Protocol. But HFCs have turned out to be a potent greenhouse gas and there has been a growing clamour to also shift away from using them.Under the Obama administration, the US signed up to a deal in Kigali, Rwanda, to phase out HFCs but the Trump administration did not send it to the Senate for ratification. The EPA said that a global phaseout could prevent up to 0.5C of planetary warming by 2100.Biden’s two chief climate lieutenants — climate envoy John Kerry and White House climate adviser Gina McCarthy — helped to negotiate the Kigali agreement. Biden is seeking its ratification by Congress.
“China will grow old, before it grows rich” is one of those things people like to say at conferences — usually followed by a dramatic pause. The implication is that China’s rise to global dominance will soon hit a giant barrier: demographics. China’s low fertility rate means that its population will shrink and age over the coming decades. Last week the FT reported that China’s population has already begun to fall — a few years earlier than the UN had predicted. A large, expanding and youthful population has driven the rise of nations for much of human history. Great powers needed warm bodies to put on a battlefield and citizens to tax. Napoleon’s conquests were preceded by a population boom in France in the 18th century. By the 20th century, France’s population had fallen behind Germany and Britain; a source of justified anxiety for the French elite. But a shrinking and ageing population may not have the same gloomy implications in the 21st century. The great-power struggles of the future are unlikely to be decided by vast land battles. In the recent war between Azerbaijan and Armenia, unmanned drones played the critical role on the battlefield. Britain’s recent strategic review cut the army, while investing heavily in technology. If technological prowess, rather than hordes of young men, is the key to future power then China is well placed. The country has cutting-edge capabilities in fields such as robotics and artificial intelligence. With a population of 1.4bn people — which is likely only to decline gently until mid-century — China will not be short of manpower either.It is the structure rather than the size of China’s population that will be the real challenge. By 2040, around 30 per cent of the country will be over 60. More old people will have to be supported by a smaller working age population, slowing economic growth. China may never achieve the per-capita wealth levels of the US. But even if the average Chinese is only half as rich as the average American, the Chinese economy would still easily surpass America’s in overall size. China will soon lose its title as the world’s most populous nation. The populations of India and China are roughly equivalent. But by the end of the century, UN projections suggest that the India’s population will be 1.5bn, compared with 1bn people in China. (Some other academic studies put China’s population in 2100 below 800m). But the Indian economy is just a fifth the size of China’s. So the wealth and power gap between the two countries will not close quickly.China’s population slump was hastened by its one-child policy, abandoned in 2015. But Chinese demographic trends are fairly typical for east Asia. The Japanese population peaked at 128.5m in 2010 and is now falling. The UN projects Japan’s population to be just 75m by the end of the century. The trends in South Korea are similar.The shrinking and ageing of populations is also taking place in parts of Europe. Italy’s population has already begun to fall. Even the US is slowing down. The latest census shows that America’s population is now 331.5m — but growing at its slowest rate since the 1930s. Demographers speculate that America, like Europe and east Asia, may soon be grappling with the problems of an ageing population.Overall, the world’s population is expected to keep growing from 7.8bn today to roughly 11bn by 2100 — with most of the growth in Africa and south Asia. The population of Africa alone is set to double between now and 2050. By sheer weight of numbers, countries such as Nigeria and Pakistan, will gain global influence. But they are also likely to remain relatively poor and politically unstable — with climate change worsening the prospects for much of sub-Saharan Africa. Some of the fastest population growth is taking place in already failing states such as the Democratic Republic of Congo and Niger.Demography will continue to shape world politics, as it always has. But the historic connection between a growing and youthful population and increasing national power is giving way to something more complex. The most significant division may now be between rich and middle-income countries — where populations are static or falling — and poorer countries, where populations are expanding fast. Left unchecked, the natural corrective tendency would be mass migration from the Global South to Europe, North America and east Asia. But east Asians are currently much less open to immigration that the west. Even though Japan’s population could almost half by 2100, the Japanese are clinging to social homogeneity in preference to mass migration. China, which has a very ethnically-based view of citizenship, will probably make similar choices.By contrast — despite the current political rows about immigration in the US and the EU — the west is likely to remain comparatively open to migrants. Western societies will gain economic dynamism as a result. But they could also lose political stability — since the backlash against immigration has helped to drive the rise of politicians such as Donald Trump.The big question of geopolitics will be not who has the larger population — but whether China or the west have made the right call on mass firstname.lastname@example.org
As the US has seemed to get a grip on its Covid-19 crisis, Canadians have been angered by a chaotic government response that has allowed a third wave to take hold and led to a delayed vaccine rollout.It is a contrast driven home by the fact that Canada’s case count, when adjusted for population, now exceeds that of the US for the first time since the pandemic began.“It’s such a reversal of how we felt as Canadians for the last four years of Donald Trump,” said David Coletto, chief executive of Abacus Data, a polling firm. “It’s a bizarro world for us to now look down south and say: ‘What do you mean they’re doing better than us?’”While there are hopeful signs that Canada has turned a corner in the fight against its steepest wave of Covid-19 cases, hospitals in the country’s largest city of Toronto are at full capacity and health officials are nervously watching the spread of a variant first identified in India.“The current plateau is very precarious,” said Dr Adalsteinn Brown, co-chair of the Ontario government’s Covid-19 Science Advisory Table during a presentation Thursday. “This is a place where you can either start to drive down the pandemic . . . or if we see a change [in lockdown measures], as we have seen in the past we could see substantial exponential growth and really a continuation of the third wave or a fourth wave.”Cases of Covid-19 have risen right across Canada during its third wave but the hardest-hit provinces are Alberta in the west and Ontario, the most populous.Alberta introduced fresh restrictions last week after reporting a record high 2,430 new cases, with Ontario reporting 3,370 on Saturday. The seven-day average in that province peaked on April 17 at 4,370. Ontario also reported 900 patients in intensive care, its highest figure since the start of the pandemic.At least one Toronto hospital began moving patients to other hospitals in the past few days because of dwindling oxygen supplies.Ontario’s premier, Doug Ford, has in recent months overseen a shambolic pandemic response that has whipsawed for businesses and residents. After declaring the province’s second state of emergency in January, he then pushed for Ontario’s economy to reopen throughout February as cases and hospitalisations fell.The province allowed restaurants to reopen to patio dining in late March, only to reverse course two weeks later as the third wave took hold. Restaurants Canada, a lobby group, estimates that businesses spent C$100m (US$83m) preparing for the aborted reopening.Ford’s government declared a third state of emergency two weeks ago and imposed new social curbs, including shutting playgrounds and authorising arbitrary police stops of residents. A fierce backlash forced the premier to reverse both measures within days. “We got it wrong,” he told reporters while choking back tears.Health officials say the government’s continued focus on restricting outdoor activities such as golf, tennis and camping is misguided because workplaces and indoor spaces have seen the most outbreaks.Last week, after months of pleading from doctors, Ford’s government introduced a sick-pay plan that will compensate workers up to $200 a day for three days to encourage them not to return to work if they are unwell.Experts say the measure will not be enough, given the length of time it takes to recover from Covid-19 or to quarantine after an exposure. “It’s tokenism,” said Dr Ashleigh Tuite, an epidemiologist at the University of Toronto. “Having three days is better than no days but if you want to do this in a way that would be meaningful, it needs to be a minimum of 10.”Ontario’s third wave has been made worse by a vaccine rollout that was slow to start and has been mired in finger-pointing between the province and Justin Trudeau’s federal government.Critics say Trudeau’s government was too slow to sign agreements with vaccine makers and did not move fast enough to secure domestic manufacturing capacity. The federal government has in turn accused provinces such as Ontario of leaving too many doses sitting in fridges.When Canada fell behind many other countries in administering doses earlier this year, it adopted a strategy similar to that of the UK in which second doses of vaccines are delayed by several months.As a result, 32 per cent of Canada’s population has received one dose, putting it in third place among major economies. However, only 2.9 per cent are fully vaccinated, compared with 21 per cent in the UK and 30 per cent in the US.“We’re seeing patients come into hospital quite sick after they’ve had their first dose and some of them well beyond the first two weeks when it becomes effective,” said Dr David Jacobs, chair of the Ontario Specialists Association and a vocal critic of Trudeau on social media.“So we’ve neither managed to get herd immunity with the volume of vaccines we’ve received and nor have we protected individuals with only one dose. Trudeau has failed on both fronts.”
In recent days Ford has focused his criticism on Trudeau’s handling of Canada’s border controls, which allowed more contagious variants to gain a foothold. As of this week, 90 per cent of coronavirus cases in the country are the B.1.1.7 variant, which first emerged in the UK. Public Health Ontario has recorded three-dozen cases of the variant first detected in India.“Last week the Indian variant was reported in Ontario,” Ford said on Friday. “I can tell you it didn’t swim here.” On April 22 the Trudeau government bowed to pressure and suspended flights from India and Pakistan.Ford has since called on Trudeau to require anyone entering Canada by land from the US to face a three-day mandatory quarantine in a government-approved hotel, which is currently only required for people arriving by air. He pointed to reports of international travellers flying to US airports and either walking or taking taxis into Canada.Trudeau on Friday said his government was considering the request but suggested existing safeguards such as testing and self-quarantine rules were working.So far, it is Ford who is paying the steepest price politically for the third wave. A survey by Abacus Data found the share of Ontario’s population with a positive impression of Ford had fallen from 39 per cent in mid-April to 28 per cent last week.“For most of the pandemic people felt he was doing as good a job as he could with his ‘Aw shucks’, Uncle Doug approach,” said Coletto. “With the third wave, people started to ask why it got so bad and they’re more likely to blame him.”
Some of Credit Suisse’s largest shareholders will attempt to remove the board member in charge of risk oversight, in protest at twin scandals that have cost the bank and its clients billions and tarnished its reputation.Andreas Gottschling — a 53-year-old German who has served as chair of the risk committee since 2018, earning a $1m annual fee — has come under fire after the Swiss bank lost at least $4.7bn from the collapse of family office Archegos.That came shortly after Credit Suisse had to suspend $10bn of supply-chain finance funds linked to controversial financier Lex Greensill, whose insolvency could cost the lender’s clients as much as $3bn. The bank has been forced to raise $1.9bn to shore up its capital and has cancelled investor payouts.David Herro, vice-chair of Harris Associates, which says it owns 10.25 per cent of the stock, said: “It’s the director’s job to represent the shareholders and to watch over management . . . Not only should Mr Gottschling be voted down, but I’m actually surprised in light of current events that he hasn’t already resigned.”Herro added he hoped the arrival of a new chair — former Lloyds Bank chief executive António Horta-Osório — on April 30 would lead to an overhaul of the board with more banking expertise recruited.Harris will be joined by the Ethos Foundation, which represents 200 Swiss pension funds that own between 3 and 5 per cent of the lender.“Our clients are really angry about what has happened,” said Vincent Kaufmann, chief executive of Ethos. “Other members of the risk committee have not been there very long so we will give them more of a chance. [Gottschling] took over in 2018 as chair. This now requires a change.”Norway’s oil fund also said on Sunday it would vote against the re-election of Gottschling, as well as five other board members including lead independent director Severin Schwan. The world’s largest sovereign wealth fund owned 3.43 per cent of the stock at the end of last year, according to its most recent disclosure.Credit Suisse and Gottschling declined to comment.Last week, influential proxy adviser Glass Lewis advised shareholders to vote against Gottschling. It said the Greensill and Archegos scandals “cast significant doubt on the efficacy of the board’s oversight of the company’s risk and control framework . . . Gottschling holds ultimate accountability”.However, its proxy peer ISS did not counsel investors to oppose the board member.Even with the backing of Norges, it is unclear if Harris and Ethos can gather enough support to unseat Gottschling. Last year, Herro led a public campaign backed by Ethos and hedge funds Silchester International Investors and Eminence Capital to remove chair Urs Rohner and keep ex-chief executive Tidjane Thiam in his role.He failed. Thiam stepped down, the chair was re-elected and continued until the end of his term. Rohner said at the time that other large shareholders, including BlackRock, had been more supportive of him and that the investor unrest was “not something which worries me a lot”.Gottschling started his career as a quantitative analyst at Deutsche Bank and has also worked for McKinsey and as chief risk officer of Erste Bank. He is also a director at Deutsche Börse.As a director, he was involved in multiple conference calls on the risks presented by Greensill last year. They were prompted in part by FT stories revealing that SoftBank was using Credit Suisse’s supply-chain finance funds to route hundreds of millions of dollars to struggling companies it owned.Ultimately, Gottschling sided with those who thought Greensill was a valuable entrepreneurial client with whom it was worth continuing business, according to people with direct knowledge of the matter.
While the SoftBank circular financing scheme was stopped, the Greensill-linked SCF funds subsequently grew to $10bn. Gottschling was also a supporter of Lara Warner, Credit Suisse’s ex-chief risk and compliance officer who was removed this month.Another person close to the bank said Gottschling did not participate in calls about Greensill outside normal risk committee discussions and did not personally “back” him.Greensill and Archegos are not the only risk management failures during his tenure. In 2018, Credit Suisse lost about $60m after it was left holding a block of shares in clothing company Canada Goose when its stock plunged. A year later, the bank lost $200m when New York hedge fund Malachite Capital failed.Additional reporting by Richard Milne
One resigned after being accused of raping a sex worker. Another is reportedly being investigated on suspicion of having sex with a 17-year-old. A third has been demoted after being accused of raping a 16-year-old in the 1980s. So goes the news of the past two weeks about three politicians in three legislatures in two countries, the US and Australia. Even by modern political standards, it has been a hectic time for sexual misconduct allegations.Coincidentally, I once worked in the same places as all these men. So I find myself asking, yet again, what it is about the world’s parliaments that make them seem so toxic — and why are they taking so long to change?I was a very junior reporter in the early 1980s when I was sent to cover the New South Wales parliament in Sydney, which until last week contained an MP named Michael Johnsen. He quit after reports that he had offered a prostitute $1,000 to have sex in his Parliament House office and sent her lustful texts during Question Time. Party bosses, already dealing with allegations Johnsen had sexually assaulted the woman, said his time was up. His alleged behaviour in parliament, as one leader put it, “would not pass the pub test”.Was anything like that happening when I was there? Very possibly, though I can say with confidence there was no sexting back then, on account of it being more than 20 years before the first iPhone went on sale.It was the same at the national parliament in Canberra, where I spent the last years of my twenties. Political journalism teaches much about human behaviour but what has happened over the past eight weeks in Canberra has been jolting. Christian Porter has been moved from his post as attorney-general after being accused of raping a woman more than 30 years ago. A former ministerial staffer has said she “woke up mid-rape” in parliament house two years ago after going there at night with a senior male colleague. Four other women said the same colleague assaulted them, and images emerged of another government aide masturbating on a female MP’s desk.Canberra is for once making bigger waves than Washington DC, where Florida congressman Matt Gaetz has been fighting allegations he had sex with an underage woman and broke federal sex trafficking laws. Having been a foreign correspondent in Washington in the Clinton years, this case seems more regrettable than remarkable, especially after the Trump years. Either way, we still don’t know the outcome of the inquiries into this latest string of allegations, all of which are denied by the three men involved. If any of these politicians do end up with a case to answer though, it will not be a surprise.For a start, workplaces do not get much more hostile than a parliament. By design, these places are full of active combatants eager to do each other in. But parliaments also share two of the traits most closely linked with high rates of sexual harassment in other workplaces: a lot more men than women, and what researchers call an “organisational climate” that effectively tolerates harassment. In other words, a leadership that fails to protect complainants, punish culprits or take complaints seriously. Some good has come as a result of the latest spate of allegations. In both Washington DC and Australia, there is a growing recognition that legislative bodies should address their historic lack of HR departments or the processes for dealing with misconduct that have been common in corporate life for years. These systems are not always perfect, nor, indeed, is the complaints scheme set up in the UK parliament after a wave of sexual misconduct allegations engulfed Westminster in 2017. But they do at least exist. Even better, conservative political leaders, in Australia at least, have flagged the need for the gender quotas their parties have long resisted, in order to even up hopelessly imbalanced parliaments. It’s about time. Men make up half the global population but hold 75 per cent of seats in global parliaments on average. In Australia’s lower House, the figure is 69 per cent. In the US it’s 73 per cent. Ultimately, change won’t happen until the people who decide what behaviour is acceptable look a lot more like the people who elected email@example.comTwitter: @pilitaclark
The super-rich bought more homes in London than any other city in the world last year, according to new figures from estate agent Knight Frank, with buyers lured by the weak pound and the end of the UK’s Brexit saga. Buyers from around the world spent almost $4bn on so-called super-prime properties in the UK capital, which are classified as anything with a price tag of $10m or more. That is more than the total spent on super-prime homes in any other city last year, with London leapfrogging Hong Kong and New York, according to Knight Frank. Despite travel restrictions and the fact that the UK’s housing market was effectively locked down between March and May 2020, the number of sales above $10m in London last year was up on 2019, with Russian, French and Chinese buyers particularly active.The influx of money from overseas came as many London residents looked to the suburbs and the countryside in search of more space in the era of homeworking. “The story all last year was that people were moving out of cities. But quietly there were some big purchases taking place,” said Liam Bailey, global head of research at Knight Frank. In all, 201 super-prime properties were sold with an average price of $18.6m. In 31 of those transactions, buyers paid $25m or more.
One of biggest sales of the year was the purchase of a £42m Belgravia mansion by British industrialist Sanjeev Gupta, revealed last month by the Financial Times.Buyers of $10m-plus homes in London and elsewhere are a narrow, international set, motivated and constrained by entirely different factors to those that move the mainstream housing market. Where they choose to buy signals as much about the relative attractiveness of a city’s tax regime or its safety as a place to store wealth as it does about livability.Despite the pandemic, the $19bn spent on super-prime properties across a dozen cities monitored by Knight Frank last year was just 5 per cent less than the 2019 total.London’s attractiveness has been burnished by the conclusion of Brexit negotiations and the fact that average prices in the most expensive postcodes are down around 20 per cent from a 2015 peak, said Bailey.Another large factor driving strong sales was the cheapness of the pound against the dollar and euro, he added. Super-prime sales in New York fell 48 per cent last year as wealthy buyers looked to sunnier coastal cities in the US such as Palm Beach, Los Angeles and Miami.
Trade in Hong Kong, which had the highest number of $10m-plus sales in 2018 and 2019, fell 27 per cent, hit by political uncertainty and tough coronavirus measures, said Bailey.“There’s still a cachet to a London residence even if you’re not in it for months at a time. If you’re super wealthy you will have a plane, a helicopter, a superyacht and your place in London,” said Nathalie Hirst, a London-focused buying agent whose clients are hunting homes with a budget of up to £100m.“I had clients predicting doom and gloom, Armageddon, but the property market has carried on,” she said.
Sanjeev Gupta’s GFG Alliance is working on plans to raise new loans against parts of the group outside the UK, and on generating cash from an expedited sale of goods, as the metals tycoon battles to save his empire. The group is taking these measures to shore up its finances while it continues to look for alternative long-term funding after the collapse of its main lender. Greensill Capital filed for insolvency earlier this month, forcing GFG, which has $20bn in turnover and employs 35,000 people across four continents, to scramble for funding. The UK government rejected a direct plea by Gupta on Friday for more than £170m to help with working capital, as well as additional funds to cover operating losses in the short-term at the group’s British operations while it restructures its debt. The proposal suggested an investment vehicle be created to provide financial returns over a period of time. Concerns have been mounting over the fate of Liberty Steel, the alliance’s steelmaking business and the UK’s third-largest producer. GFG employs close to 5,000 people in Britain, of whom around 3,000 work in the steel industry. Ministers, however, said they were anxious about GFG’s opaque structure and fear that any handout could end up leaving the UK. “Our priority is the UK sites and jobs, not this corporate entity,” said one government figure. GFG has stepped up “self-help” measures to stave off financial collapse, according to people familiar with the situation. These include selling stocks of scrap metal and accelerating the sale of finished goods in order to help raise working capital. The company is also in talks to raise money against those assets outside Britain that have no debts against them. The cash raised could then be transferred back into the UK operations, one person said. GFG’s most valuable asset is believed to be InfraBuild, its Australian business.Another option being considered is raising money against some of the group’s UK operations. One sticking point, however, is understood to be securing permission from Greensill, which holds security over certain GFG assets. Complicating the situation is that administrators to Greensill are still trying to establish the identity of all the investors in the finance company and their position within the financing chain.
GFG said Greensill’s difficulties had “created a challenging situation” but stressed the group had “adequate funding” to meet current needs. It said it was taking specific actions at its UK speciality steel businesses to “stabilise the business and improve cash flow”. A government spokesperson said it was closely monitoring developments around Liberty Steel and continued to engage closely with the company, the broader UK steel industry and trade unions. The Financial Times reported last week that ministers have drawn up contingency plans to take over the running of GFG’s British operations in the event of a collapse. The Treasury supported British Steel in the same way in 2019 before it was finally sold to a Chinese steel group. MPs on the business select committee (BEIS) are drawing up plans for an inquiry into the Gupta steel business in the UK, including his links to Greensill Capital, his connections with politicians and his support from the government. However, Tory MPs are understood to have vetoed any attempt by the committee to force David Cameron — who lobbied chancellor Rishi Sunak on Greensill’s behalf — to break his silence. The Beis committee is expected to announce its inquiry within a fortnight. The FT recently revealed that when Cameron was prime minister he gave Greensill, an ally of former cabinet secretary Jeremy Heywood, a desk in the Cabinet Office and a role as a “crown representative” adviser. Meanwhile, the Sunday Times reported that Cameron signed off a loan scheme in 2012 for NHS-linked pharmacies even though an official report rejected Greensill’s proposals — and that the Australian financier used his position to lobby 11 departments for private work.
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The chief executive of Warner Music has called into question the financial sense of some of the high-priced back catalogue acquisitions of recent months, after a string of deals for songs by the likes of Fleetwood Mac and Barry Manilow signalled a modern-day gold rush in music rights.
“Both in 1849 and later in the Yukon, more people went broke than they did make money,” said Steve Cooper, chief executive of Warner, the world’s third-largest music company.
“When you . . . pay north of a certain multiple, you’re beginning to move into the world of finance that lacks a certain amount of discipline,” he told the Financial Times. “I praise the people that can figure out how to make money when they pay 25 times [a song’s historic annual royalties]. God bless.” A combination of low interest rates and the rise of streaming has spawned a scramble for music rights. London-listed Hipgnosis has raised and spent £1.2bn on the rights to hit songs since it floated in 2018 and has been on a buying spree, having struck deals with Neil Young, Jimmy Iovine and Lindsey Buckingham already this year.
Hipgnosis has on average paid 14.76 times songs’ historic annual income to acquire some of the rights to hits by artists such as Barry Manilow, Fleetwood Mac and Bon Jovi.
But founder Merck Mercuriadis has said that for some catalogues he had paid a multiple as high as 22, prompting scorn from some music executives and industry analysts.
“At the moment it’s a very favourable rate environment, and what we see is a lot of people moving money from traditional fixed income to . . . what they believe is fixed-income structure,” said Mr Cooper, referring to the predictable royalty payments that songwriting catalogues generate. Bidders including private equity groups, specialist buyers and music labels have battled for the catalogues of older established artists, whose music has enjoyed a new lease on life thanks to streaming — effectively doubling the value of music rights over the past decade.
Warner Music itself has benefited from an industry-wide revival in music revenues as people shifted listening to paid subscriptions on Spotify and other audio streamers, generating a new source of income for music owners in a digital era.
Mr Cooper’s comments came as Warner Music reported its highest quarterly revenue since the company was spun out of Time Warner in 2004.
The record label behind artists including Lizzo and Ed Sheeran reported that total revenue grew to $1.3bn in the three months to the end of December, up 6 per cent from a year ago. The company posted adjusted net income of $114m, down about 10 per cent, which Warner attributed to unfavourable changes in exchange rates on euro-denominated debt.
Digital revenue in the quarter, which includes streaming on Spotify as well as royalty fees from social media companies, grew 17 per cent from a year ago to $825m.
As streaming on Spotify matures, social media has been cast as the next frontier in how music labels can extract money from their songs. Warner Music in December signed a new licensing deal with TikTok, setting royalty payments when songs from Warner artists are played on the Chinese-owned social media app.
US cities are losing their allure for renters, placing early signs of strain on the $1.2tn market in bonds backed by mortgages on apartment blocks.
The coronavirus pandemic is still rolling through the global population and working from home remains the norm in many professions, pushing some city residents to pack up and leave. Data company Trepp has identified 50 so-called multifamily loans with a balance of $1.5bn where the occupancy rate of buildings dropped by 15 percentage points cent last year.
Investors in commercial mortgage-backed securities, where loans backed by properties like apartment buildings are bundled together to underpin the sale of fresh debt, are watching closely. “Is this the tip of the iceberg?” said Manus Clancy, head of research at Trepp. “Our thought is that the number of loans struggling with low occupancy levels has to go up.”
Trepp’s data underscores the risks in the commercial mortgage market. Despite investor exuberance spurred on by the prospect of a widely administered vaccine helping to push CMBS prices higher, it could still be some time before people return to working in office buildings in major cities where rents are steep.
“In the big urban cities we are seeing occupancy sinking,” said Mr Clancy. “It is expensive to live in these places and right now you can’t do anything with the available amenities and you are not going to the office. Those were often the reasons people stayed in their apartments. It’s not surprising these things are dwindling.”
The occupancy rate of the NEMA luxury San Francisco apartment building that sits opposite Twitter’s corporate headquarters dropped to 70 per cent in 2020. The $200m loan behind it, backing a single-asset CMBS forged in 2019, has recovered in value since the darkest point of the pandemic’s blow to global markets. But it remains well below pre-pandemic levels. The triple B rated tranche of the deal is priced at 95 cents on the dollar, having traded at a premium of more than 115 cents on the dollar early in 2020.
In New York, the 75-unit Chelsea29 apartment building on 29th street, boasting a roof terrace and fitness centre, has seen its occupancy drop to 75 per cent. It makes up just 2 per cent of a $1.3bn CMBS deal from 2019 that trades around 90 cents on the dollar, having clawed back ground since March.
The fall in occupancy tracked by Trepp affects only 4 per cent of the loans that had reported numbers by late 2020. Analysts and investors have expected a drop-off in rent payments for some time given the dwindling fiscal stimulus support. But the strain comes alongside early signs that remaining tenants are also beginning to struggle to pay their rent. Analysts at the New York Fed warned of an “eviction cliff” in a white paper last month. The pandemic and related job losses “have limited residential and commercial renters’ ability to pay monthly expenses and landlords’ ability to keep current on mortgages,” the authors Marisa Casellas-Barnes and Jessica Battisto wrote.
The National Multifamily Housing Association found that just over 75 per cent of households made a full or partial rent payment for the month by December 6, down almost 8 percentage points compared to the same point in the previous year. It marks the biggest year-on-year drop since the onset of coronavirus. The month ended with just shy of 94 per cent of tenants paying their rent.
“A rising number of households are struggling to make ends meet,” said Doug Bibby, president of NMHC. “As the nation enters a winter with increasing Covid-19 case levels and even greater economic distress . . . it is only a matter of time before both renters and housing providers reach the end of their resources.”
Bank stocks, stuck in investors’ doghouse for years, are back in favour, gaining further support after Senate run-off races last week that flipped control to the Democratic party.
The sector suffered a rough 2020 as coronavirus lockdowns threatened to spark a rush of loan defaults, drawing out a period of marked underperformance since long-term interest rates began to fall in 2018, compressing profit margins.
But US bank indices have outperformed the wider market by more than 25 percentage points since Pfizer and BioNTech announced on November 9 that their Covid-19 vaccine had proven highly effective. “The banks are going from the land of misfit toys, where they were in the summer, to being an area of interest for investors,” said Charles Peabody of Portales Partners, a research house specialising in banks. “People are picking up the phone when we call.”
Investors are now hunting for stocks likely to feel the benefit of the vaccines-led rebound, while the prospect of the Democratic party controlling the White House and both chambers of Congress has also fuelled inflation expectations, triggering a rise in long-term interest rates that bodes well for banks’ profits.
On Wednesday, after the Georgia results came in, US bank shares rose by almost 7 per cent, their biggest daily gain since November.
The coronavirus crisis made a run of poor performance much worse. The KBW bank index lost a quarter of its value from late 2018 to late 2020, underperforming the S&P 500 by almost 50 percentage points. The valuation of the index, as measured by the price/earnings ratio, is now about half of the wider market’s, Autonomous research points out. Historically, the banks’ discount has averaged 25 per cent. “The underperformance of banks versus the overall market in 2020 was really extreme — we had to go back to 2000 to find something similar, and when that reversed, banks outperformed for eight years,” said Ben Mackovac, portfolio manager for the Strategic Value Bank Partners fund, which invests in community banks.
The shift in sentiment is most visible in the attitude towards Wells Fargo, which has not yet recovered from its 2016 fake accounts scandal. Labouring under an asset cap imposed by regulators, the bank lost more than half its value early in 2020. Since November, however, it has received five upgrades from Wall Street analysts, and the shares have rallied almost 40 per cent. Rallies are visible outside the US, too. In Europe, an index tracking bank stocks on the benchmark Stoxx 600 index climbed 30 per cent in November, its best month since 2009. Gregory Perdon, co-chief investment officer at Arbuthnot Latham, said the bullish trade for banks is squarely on in Europe as long as US 10-year government bond yields stay at around 1 per cent or higher.
One veteran investor in financials remains sceptical. Dave Ellison, the portfolio manager of Hennessey Funds’ large and small-cap financials funds, said that while banks have enjoyed a relief rally, very low rates and low growth are here to stay.
“A 3 per cent cost of funds and a 6 per cent return on a mortgage? Those days aren’t coming back,” he said. “How do you grow customers? Not on price — the cost of capital is already zero. Not on service — you can’t compete with Apple or Google.” His portfolios are dominated by non-bank financial services companies, such as PayPal and Visa.
But optimists point to several factors. Some think shareholders are in line to benefit from a rush of share buybacks from banks in the coming months — a step that the US Federal Reserve reopened for lenders in late 2020.
Autonomous estimates that large US banks’ excess capital stands, on average, at 18 per cent of their market capitalisation, suggesting they could buy back a meaningful proportion of their own shares.
Shares in smaller banks, meanwhile, could benefit from consolidation. In recent years, investors have reacted coolly to bank mergers, balking at the big premiums paid for targets. Increasingly, however, banks are doing low- or no-premium mergers of equals, on the model of the $28bn BB&T-SunTrust deal of 2019, which created Truist.
In December, Huntington Bancshares agreed to buy TCF Financial for about $6bn, a small premium, taking the total volume of deals in 2020 to $32bn, in line with recent years’ totals, despite the virus.
The final catalyst is rising interest rates and a steepening yield curve — a bigger gap between short and long-term rates. A steeper curve means higher profits, as it increases the difference between banks’ cost of funding and what they earn by lending. Both the release of pent-up economic demand as the pandemic eases, and supportive monetary policy, should in theory lead to a steeper curve.
David Konrad, a banks analyst at the broker D.A. Davidson, said that with the economy emerging from the Covid-19 crisis, “it’s hard to imagine that in the back half of next year we don’t have a steepening curve”.
Until recently, analysts and investors say, bank stocks have been seen as a trade rather than a long-term play, except among the small fraternity of investors who specialise in the financial sector. For the group to take another leg up, they argue, requires generalist investors to buy in.
For much of the last year, said Mr Konrad, the bank space has been “a knife fight among hedge funds fighting for positioning”. But a recent pick-up in yields on US government bonds has started to interest generalists, he added.
This holiday’s biggest blockbuster was not a film. Wonder Woman 1984, the superhero sequel which might have dominated box offices in any other year, made less than $17m in US cinemas over its opening weekend — half what last year’s Star Wars film made in its first day.
Instead, as Covid-wary audiences chose couches over cinemas, the buzz was stolen by a carnal costume drama released to the nearly 200m Netflix subscribers whose binge-watching during the pandemic has lifted the streaming service’s market value to $240bn.
In Bridgerton, a Regency romp based on Julia Quinn’s novels, corseted debutantes circle eligible bachelors. Rakes smoulder, gossips meddle and bosoms heave. It is a genre as hoary as the hospital drama, and it was propelled to the top of Netflix’s most-watched list by Shonda Rhimes, the executive producer who made the medical soap Grey’s Anatomy the biggest hit on Disney’s ABC network. Yet she and showrunner Chris van Dusen, her one-time assistant, have turned a period drama into a contemporary conversation piece: Bridgerton is a modern-scored, feminist reimagining of 19th-century England and several of its stars are black. The contrast with the pale-faced casts of previous romance adaptations turns a piece of froth into something more subversive.
The series is the first Rhimes production to appear since she signed a reported $150m deal with Netflix in 2017, and lands at a pivotal moment in her career. At 50, she has become one of television’s most bankable talents, and with each hit series — Private Practice, Scandal, How To Get Away with Murder — the qualifiers have fallen away. She is no longer just one of her industry’s most successful women or African-American producers: she is, as she defiantly declared in 2018, “the highest paid showrunner in television”.
Estimates of Ms Rhimes’ wealth congregate around $140m, though Shondaland, her production company, discloses no figures and she says the details of her Netflix contract were misreported. Tellingly, though, she made her boast after Netflix struck a reported $300m deal with Ryan Murphy, who made Glee for Fox.
The defections of two of television’s most prolific producers sent shudders through the networks, as they showed how aggressively streaming services were competing for content. Ms Rhimes had been chafing over creative freedom at ABC, and the last straw was when a Disney executive baulked at giving one of her sisters a pass to one of its theme parks, reportedly asking her, “Don’t you have enough?”
Ted Sarandos, co-CEO and chief content officer of Netflix, had good reason for offering her a freer rein as television’s streaming wars are becoming more intense — and expensive. The likes of Disney+, HBO Max and Peacock now challenge Netflix, Amazon Prime and Apple TV+, and the money being poured into production has rocketed.
Only the biggest shows stand much chance of cutting through, making reliable hitmakers increasingly valuable. While promoting Bridgerton, Ms Rhimes is completing Inventing Anna, the story she adapted of a fake heiress swindling her way through New York’s elites, and working on an adaptation of Recursion, Blake Crouch’s sci-fi thriller. The Netflix relationship is just one aspect of Ms Rhimes’ quest for scale. She is producing podcasts with iHeartMedia and writing lessons with MasterClass; she has launched partnerships with Dove, Microsoft and Peloton. Her website brims with empowering blog posts. (“If you don't like your story, rewrite it.”)
The self-described introvert who had been “horrified” to hear that she would be sitting with Barack and Michelle Obama at an event in 2013, admitted to Oprah Winfrey three years ago that her characters lived much more exciting lives than hers. But she is now creating a multimedia empire that the older entrepreneur would recognise.
Ms Rhimes started rewriting her story in 2014 when, stung by a sibling’s observation that she was constantly turning down invitations, she resolved to spend a year saying “yes” to “the stuff that terrifies me”, from public speaking engagements to shelving work to play with her three adopted children.
By the end of her “year of yes”, the Democratic donor had befriended the Obamas and given a barnstorming graduation speech at Dartmouth, her alma mater. Commencement speakers usually advise graduates to follow their dreams, she told her audience, but “I think that’s crap”. Dreams do not come true on their own, she said: “It's hard work that creates change.”
Since holding colour-blind casting calls for Grey’s Anatomy, Ms Rhimes has been working to change television by making it look more like the diverse world she knew growing up as the sixth child of two academics in a middle-class Chicago suburb. Speaking in 2018, she said her “sweat and tears” meant that she “no longer needed to battle men to get to the top of a mountain” but she still needed to set an example.
Shondaland’s landmark deal will be up for renewal this year. Netflix needs hitmakers like Ms Rhimes, but its history of ending shows abruptly if the numbers are not working suggests that nothing is guaranteed. So a lot is riding on the escapist fluff of Bridgerton. The market for the kind of talent that can offer an advantage in the streaming wars is every bit as unpredictable as the marriage market in Regency England.
Donald Trump’s administration has stepped up its long-running trade dispute with the EU over aircraft subsidies, saying it will increase tariffs on aircraft parts and beverages from France and Germany.
The move was announced by the Office of the US Trade Representative late on Wednesday and will apply from January 12 — shortly before Joe Biden is sworn in as US president.
The USTR said it would raise the levies on the grounds that the EU had improperly applied tariffs on $4bn worth of American products last month by calculating them based on trade volumes since the coronavirus pandemic erupted this year. The EU measures were authorised by the World Trade Organization. Washington said Brussels had therefore imposed duties on “substantially more products” than it would have if the tariffs had been calculated based on a “normal period”.
The $4bn in tariffs imposed by the EU followed the US targeting of $7.5bn in EU goods from October 2019, which was permitted by the WTO as a penalty for subsidies to European aircraft maker Airbus. The EU tariffs, in turn, were authorised in response to US subsidies benefiting Airbus rival Boeing.
Both the Trump administration and the EU have said they want to resolve the dispute but the two sides have failed to reach an agreement, which will form one of the biggest tests of rapprochement between Washington and Brussels on trade under Mr Biden.
The European Commission said it regretted the Trump administration's move, warning that it “unilaterally disrupts the ongoing negotiation between the commission and USTR to find a settlement to the long lasting aircraft disputes”.
“The EU will engage with the new US Administration at the earliest possible moment to continue these negotiations and find a lasting solution to the dispute,” the commission said in a statement on Thursday.
The products targeted for higher tariffs in Washington’s latest move include “aircraft manufacturing parts” as well as “certain non-sparkling wine” and “certain cognac and other grape brandies”. The higher tariffs will only apply to French and German products. The fight over aircraft subsidies has simmered for years but escalated sharply during Mr Trump’s presidency alongside tensions on digital taxes introduced in the EU, metals tariffs imposed by the US and car levies threatened by Washington.
Airbus said the US tariffs were “counterproductive in every way” and hoped that “Europe will respond appropriately to defend its interests and the interests of all European companies and sectors, including Airbus”. Video: US foreign policy: Joe Biden's priorities in 2021
Argentina’s economy minister played down the prospects of an early deal with the IMF to repay a controversial $44bn loan, as the country’s year-old leftist government tries to build a domestic consensus on how to end its economic crisis.
After successfully restructuring $65bn of foreign debt with private creditors in August, the government’s attention has turned to talks with the IMF, which began this month. Markets hope this will lead to a new programme that could help to reverse a crisis of confidence that has stoked fears of an imminent devaluation of the peso.
“We are fine. We have the instruments to maintain [exchange rate stability],” insisted Martín Guzmán, economy minister, in an interview with the Financial Times. He argued that there was no need for Argentina to seek further help from China, after the central bank renewed a currency swap deal with the Asian country for $19bn in August for another three years, to bolster alarmingly low foreign exchange reserves. “The most important aspect is to get [the new programme] right. We want to move at a solid pace but require common understanding and legitimacy. We are not going to rush this,” added the 38-year-old economist.
A deal by March or April “would certainly be acceptable”, he said. “That doesn’t mean it won’t come before that, but there are no guarantees.” The negotiations with the IMF come as Argentina seeks a way out of a three-year long recession. That downturn began after a currency crisis in 2018 that prompted the fund to come to the rescue with a record-breaking $57bn programme — making Argentina the institution’s biggest debtor by far. The recession was made worse by the coronavirus crisis, which prompted the government of President Alberto Fernández to implement one of the longest and strictest lockdowns in the world.
Mr Guzmán spoke from his offices opposite the presidential palace in Buenos Aires over the din of tens of thousands of rowdy Argentines who had gathered to pay their respects to Diego Maradona, the legendary footballer who died on Wednesday. The economy minister played down calls from independent economists for Argentina to seek further cheap financing from the fund.
“We have to be very careful when borrowing in foreign currency,” he said, warning that exports had been weak over the past seven years, a key factor in the sustainability of Argentina’s debt. But some say the alternatives are worse: unable to borrow on the international capital markets, Argentina is forced instead to resort to covering the bulk of its expenditure through new money printed by the central bank, which pushed the monthly inflation rate up to 3.8 per cent in October.
Nevertheless, Mr Guzmán said that it would be “beneficial” to secure more funding from other multilateral institutions such as the World Bank and the Inter-American Development Bank, especially to finance public infrastructure projects.
As Argentina prepares to embark on its 22nd programme with the IMF over the past six decades, Mr Guzmán insisted that austerity — the linchpin of most of those programmes — was not the answer to the economy’s woes.
“The 2018 programme was based on that same tenet and it didn’t work. The evidence is overwhelming that fiscal adjustments in recessions don’t work — and it’s not what we’re doing,” he said.
Mr Guzmán insisted that restoring order to Argentina’s fiscal accounts did not mean reducing spending. In fact, Argentina was increasing spending in real terms in high-impact areas, he said.
Similarly, Mr Guzmán pledged that a devaluation was not on the cards, although he admitted that the gap between the official and parallel exchange rates was a problem. “It will take time [to fix], as we can’t remove capital controls [yet],” he said, pointing to the need to accumulate foreign exchange reserves first.
“When you look at the trade numbers, the official exchange rate is at the right level . . . the situation with the [parallel exchange rate] is to do with financial flows that have nothing to do with the real economy,” he said, adding that “the IMF understands that a devaluation would have destabilising consequences at an economic and social level”.
Mr Guzmán also rejected accusations by some analysts of inconsistencies in economic policy, which they say are caused by contrasting priorities among the ruling coalition that ranges from pragmatic centrists to more ideologically driven members on the hard left.
Recent overtures to the private sector by Mr Guzmán — based on an understanding that sustained economic growth requires private investment — conflict with anti-business moves from other players in the coalition, notably the country’s Congress. Critics point to a law aimed at preventing shortages, a wealth tax going through Congress and a scathing letter sent to the IMF by a group of senators loyal to Cristina Fernández de Kirchner, the powerful vice-president.
“It all goes in the same direction,” insisted Mr Guzmán.
“In a crisis in the context of a pandemic, the state plays an important role to protect the most vulnerable and co-ordinate actions to maintain stability — but that is a role that will no longer be necessary in an economy that has restored macroeconomic stability,” he said.
Achieving sustained economic growth in the longer term once the economy has been stabilised is perhaps Argentina’s greatest challenge, however. Mr Guzmán highlights the importance of developing domestic capital markets in order to allow greater saving. That would in turn allow greater investment by the private sector, which he hopes will become “a fundamental engine for the economy”.
Americans were splashing out billions of dollars from their smartphones and laptops on Black Friday as those who have never shopped online before fuel a boom in ecommerce, leaving shopping malls deserted.
Despite good weather across much of the US, mall watchers reported sharply lower footfall than usual on what is traditionally the busiest shopping day of the year. “It’s a very sad Black Friday” for bricks and mortar, said David Bassuk, co-head of retail at AlixPartners.
Amazon, Walmart and Target were on track to be among the biggest corporate winners from a surge in digital spending, consolidating their lead over struggling rivals as shoppers who are new to online purchasing turn to retailers with the strongest digital offerings. By mid-morning on the east coast, online sales were set to increase between about 20 and 40 per cent from 2019 levels on Black Friday, according to estimates from Adobe, although the analytics group pared back earlier forecasts for an even bigger jump. It recorded $5.1bn worth of ecommerce orders on Thanksgiving — almost half from smartphones.
Retailers including Walmart have sought to spread demand over a much longer period than usual, offering promotions as far back as October, reducing sales on the day itself.
While shoppers were able to pick up bargains in person, and chains including Best Buy opened stores as early as 5am, most promotions were also available online. Several retailers were taking customer temperatures at the door and some were asking them to provide personal details for track and trace. Stores in Los Angeles, Chicago and other cities were limited to 25 per cent capacity.
With coronavirus case numbers spiking, health authorities urged restraint. The Centers for Disease Control and Prevention classified shopping in crowded areas as a “higher risk activity” that helps spread Covid-19.
About 9 per cent of online sales so far this week have come from customers who are new to internet shopping, according to Taylor Schreiner, director of Adobe Digital Insights, who said that such consumers “tended to skew older and hailed from rural parts of the country”. The ecommerce surge is the latest sign that, despite the reluctance to shop in person, a sizeable section of the population — those who have remained in work and been able to save money from staying at home — is willing to spend.
Chess boards were proving particularly popular, thanks to the hit Netflix mini-series The Queen’s Gambit, as was the PlayStation 5, which has been in short supply.
But retailers are nervous about the economic outlook as the pandemic drags on. “Consumers still face uncertainty with rising Covid cases and high unemployment,” said Sonia Syngal, chief executive of Gap, the clothing retailer, this week.
Converting additional shoppers to ecommerce threatens to cause more lasting damage for clothing chains, department stores and other bricks-and-mortar operators already ravaged by the crisis.
In New York, shopping centres that are usually bustling were a “ghost town” on Black Friday, Mr Bassuk said. “There are definitely a lot of people in New York. They’re just staying put.”
He added: “The second wave [of coronavirus] couldn’t have come at a worse time for retailers. It’s really hitting hard right now. Consumers want to be healthy for the holiday and they’re just being overly cautious.”
Bricks-and-mortar footfall in the run-up to the peak shopping season was sharply lower than usual levels, down 31 per cent year on year in the third week of November, according to RetailNext.
Initial figures indicated that Amazon, together with those bricks-and-mortar based retailers with the strongest online offerings, were increasing their lead over weaker operators.
In the week leading up to Black Friday, digital sales at Amazon jumped 65 per cent from 2019, Edison Trends figures showed. At Walmart and Target, two of the strongest bricks-and-mortar operators, they rose 167 per cent and 80 per cent, respectively.
Ecommerce business at other companies has also risen sharply, but from a lower base and at a less dramatic pace. Online sales rose 19 per cent at Nordstrom, 23 per cent at JCPenney and 54 per cent at Macy’s.
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