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Japan slips into recession, slump set to worsen as pandemic wreaks havoc

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Japan slips into recession
An industrial port is pictured in Tokyo, Japan, on May 23, 2019. (Photo by Reuters)

Japan’s economy slipped into recession for the first time in 4-1/2 years, putting the nation on course for its deepest postwar slump as the coronavirus crisis ravages businesses and consumers.

Monday’s first-quarter GDP data underlined the broadening impact of the outbreak, with exports plunging the most since the devastating March 2011 earthquake as global lockdowns and supply chain disruptions hit shipments of Japanese goods.

Analysts warn of an even bleaker picture for the current quarter as consumption crumbled after the government in April requested citizens to stay home and businesses to close, intensifying the challenge for policymakers battling a once-in-a-century pandemic.

“It’s near certainty the economy suffered an even deeper decline in the current quarter,” said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. “Japan has entered a full-blown recession.”

The world’s third-largest economy contracted an annualized 3.4% in the first quarter, preliminary official gross domestic product (GDP) data showed, less than a median market forecast for a 4.6% drop.

The slump came on top of an even steeper 7.3% decline in the October-December period, with the consecutive quarters of contraction meeting the technical definition of a recession. The last time Japan suffered recession was in the second half of 2015.

The coronavirus, which first emerged in China late last year, has ravaged the global economy as many nations went into strict lockdowns to curb the outbreak that has so far killed over 310,000 people worldwide. The pandemic has been massively disruptive on supply chains and businesses, particularly in trade-reliant nations such as Japan.

Indeed, the fallout of the virus on corporate Japan was telling with exports diving 6.0% in the first quarter, the biggest decline since April-June 2011.

Deeper slump, slower recovery

The shakeout in global trade was underlined in recent March data, with exports shrinking the most in nearly four years due to plunging US-bound shipments.

Even the nation’s major globe-trotting manufacturers weren’t spared the pandemic’s sweeping impact.

Toyota Motor Corp (7203.T) said on Friday it will cut domestic vehicle production by 122,000 units in June due to a lack of demand. The automaker expects an 80% drop in full-year operating profit, its lowest in nine years.

The gloom in Japan is expected to deepen over coming months.

Analysts polled by Reuters estimate Japan’s economy will shrink an annualized 22.0% in the current quarter, which would be the biggest decline on record, with pressure on output intensifying after Prime Minister Shinzo Abe in April declared a nationwide state of emergency amid a rise in coronavirus infections.

Japan slips into recession

The emergency was lifted for most regions on Thursday, but remained in effect for some big cities, including Tokyo.

Private consumption, which accounts for more than half of Japan’s $5-trillion economy, slipped 0.7% in January-March, less than a market forecast for a 1.6% drop, as robust demand for food and daily necessities partially offset the impact on services spending.

Still, it marked the second straight quarter of decline, as households were hit by the double-whammy of the coronavirus and a sales tax hike to 10% from 8% in October last year.

Capital expenditure fell 0.5% in the first quarter after plummeting 4.8% in October-December last year, the GDP data showed, suggesting that uncertainty over the outlook is discouraging companies from boosting spending.

Taken together, domestic demand knocked 0.7 percentage point off GDP growth, while external demand shed 0.2 point.

All of this has put a strain on the labor market. The jobless rate in March rose to its highest in a year, while job availability slipped to a more than three-year low.

Japan slips into recession

The government has already announced a record $1.1-trillion stimulus package, and the Bank of Japan expanded stimulus for the second straight month in April. Abe has pledged a second supplementary budget later this month to fund fresh spending measures to cushion the economic blow from the outbreak.

Still, many analysts warn that government support will come too little, too late due to slow implementation of spending plans.

“As always in Japan, the implementation is very slow. It will take the later half of the second quarter (and) the third quarter” for government stimulus to kick in, said Martin Schulz, chief economist at Fujitsu.

“The recovery will be slower than many are hoping for… To recover from this crisis, it will take about two years at least.”

Japan slips into recession

(Source: Reuters)

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United Airlines says could lay off as many as 36,000 employees

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United Airlines
United Airlines planes sit parked on a runway at Denver International Airport as the coronavirus pandemic slows air travel on April 22, 2020 in Denver, Colorado. (AFP photo)

United Airlines has warned it could lay off as many as 36,000 workers on October 1 as the US carrier fights for survival amid the coronavirus crisis.

The big US airline emphasized that it must cut costs due to a severe drop in demand for air travel, but although it will notify frontline employees of the potential job cuts, it does not expect everyone who receives the notice to be furloughed.

“The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed,” United said in a memo to employees.

That level of job cuts would account for close to 38 percent of United’s total headcount as of the end of March.

United does not expect travel to normalize “until there is a widely available treatment or vaccine” for COVID-19, the memo said.

The “involuntary furloughs come as a last resort, after months of company-wide cost-cutting and capital-raising.”

United is targeting 15,100 staff cuts in inflight services, including flight attendants, and 2,250 pilots. Other groups affected include catering, airport operations and technical operations.

The company extended a deadline under a voluntary departure program until July 15, and said it was “hopeful” that program would reduce the number of involuntary departures.

United also said it was in talks with unions “about creative ways to help reduce furloughs.”

‘Gut punch’

Faced with deep declines in revenues, major US airlines have delayed new jet orders, retired older aircraft and grounded much of their fleet to try to limit cash burn.

As part of the Cares Act relief program for airlines, United received $5 million in payroll support and loans but under the terms of the program cannot lay off workers until after September 30.

Sara Nelson, president of the Association of Flight Attendants, called the United announcement a “gut punch” and warned that layoffs will be repeated by other carriers unless Congress extends the payroll support program (PSP).

“Congress must extend the PSP in order to avoid hundreds of thousands of layoffs from an industry that normally drives economic activity for every other sector & supports more than 11 million jobs,” she wrote on Twitter. “Failing to do so will have a ripple effect across the economy.”

In early June, United and other carriers added flights for the summer in reaction to a better-than-expected jump in demand following the reopening of much of the US economy after closures imposed amid the pandemic.

However, United said in a securities filing Wednesday that it was cutting back some flights in August following the latest spike in COVID-19 cases in southern and western states that has prompted New York and some other states to impose quarantines on visitors from hotspot areas, and reimpose some restrictions.

Shares of United fell 3.4 percent to $31.44 in early afternoon trading.

Source: AFP

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Uber confirms it is acquiring Postmates in an all-stock, $2.65B deal

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acquiring Postmates
Image Credits: Smith Collection/Gado / Getty Images

Competition continues to heat up in the food delivery wars. In the latest development, Uber  today announced that it has acquired Postmates in a $2.65 billion, all-stock deal. It plans to run the business alongside its own food delivery business, Uber Eats, keeping the Postmates  app running while merging some of the tech and delivery operations at the back end — for example, by having drivers delivering orders for both businesses.

The deal confirms reports that emerged last week, and got re-reported last night with more financial detail, that Postmates and Uber were in negotiations. That deal itself sprung up in the wake of Uber failing to acquire another competitor, Grubhub, which was instead acquired by Europe’s takeout behemoth Just Eat Takeaway for $7.3 billion.

“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19. As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country,” said Uber CEO Dara Khosrowshahi in a statement.

Uber confirms it is acquiring Postmates

“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand. Joining forces with Uber will continue that mission as we continue to build Postmates while creating an even stronger platform that brings this mission to life for our customers. Uber and Postmates have been strong allies working together to advocate and create the best practices across our industry, especially for our couriers. Together we can ensure that as our industry continues to grow, it will do so for the benefit of everyone in the communities we serve,” said Postmates co-founder and CEO Bastian Lehmann in his statement.

Uber in its news announcement described Postmates as “highly complementary” to Uber Eats, citing the two companies’ differing geographic focuses and target demographics and noting that Postmates has strong relationships with small- and medium-sized restaurants and other businesses that are loyal to the Postmates brand, which covers not only food but delivery of other items, too.

On the other hand, Uber noted that together they’ll build better tools and technology for their merchant and restaurant partners, and that these will have a wider user base now to tap. That last point somewhat contradicts the lack of overlap between the two, so we’ll have to see how that actually plays out.

The all-stock deal valuation that Uber is paying out is a slight bump on Postmates’ last valuation of $2.4 billion, which it reached in September 2019 on the back of a private equity round (it had raised just over $900 million in total over 10 years). But with the “money” all in paper, it puts a lot of pressure both on Postmates and Uber to continue to deliver on growth — pun intended.

For Uber, Uber Eats has been one good news story amid what has otherwise been a very tough life as a publicly listed company. That predicament has taken on a more critical edge in recent months through the COVID-19 pandemic.

In its last quarterly earnings results, the Uber Eats business grew 52% and managed to somewhat offset a big decline in its ride-hailing revenues. In both cases, you can draw a line from the results to social distancing requirements that people have been following around the world: consumers have been staying home more and ordering take-out food to be delivered to them; and at the same time they have been staying away from shared, small spaces, such the ones that you might encounter in an Uber ride. However, with the boost at Uber Eats, the company lost $3 billion last quarter.

Uber confirms it is acquiring Postmates

The trend of those numbers is one reason why Uber has been looking to expand its food delivery business. The other is the one that has been motivating the larger consolidation trend in food delivery, and that is the principle of economies of scale and how that plays out in terms of operational expenditures, with single drivers able to cover more restaurants and orders, and also the costs of operating the business.

The wider business model requires a lot of subsidising to grow, so taking out a competitor somewhat reduces that kind of costly competitive pressure. It doesn’t eradicate it completely, though: DoorDash and Grubhub (now supercharged with Just Eat Takeaway profits and financial muscle) are still around and will represent strong alternatives both for consumers and restaurants looking for delivery partners.

Uber confirms it is acquiring Postmates

The public markets is a tough place to play out a growth story for a company that is still profoundly in the red like Uber. In that regard, it’s an ironic place for Postmates to land.

The latter had also been eyeing up a public listing, going so far as to confidentially file for an IPO in February 2019. “Choppy” market forces got the better of it, however, and it put off the plans. Although there were rumors even as recently as last week that the company was still considering this option, in retrospect, that was quite possibly a report planted and spun by those hoping to hedge a better deal out of Uber.

Uber confirms it is acquiring Postmates

source: techcrunch.com

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UK court denies Venezuela access to $1 billion of gold, sides with Guaido

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UK court denies Venezuela access
This is a view of the Bank of England in London, Britain. (Photo by Reutere)

A British court has refused to return $1 billion of Venezuela’s gold reserves held in London, siding with opposition figure Juan Guaido who asked for the release to be denied.

Judge Justice Teare at the English High Court said the government in London had “unequivocally recognized” Guaido as Venezuela’s president in a case that was initiated by Venezuela’s Central Bank in a bid to reclaim the gold reserves.

Teare’s judgement said: “Her Majesty’s Government does recognize Mr Guaido in the capacity of constitutional interim president of Venezuela and, it must follow, does not recognize Mr Maduro as the constitutional interim president of Venezuela.”

The Central Bank of Venezuela wants the gold to be released from the Bank of England to help fund the nation’s response to the coronavirus crisis.

Maduro’s government described the move as “absurd and extraordinary” as he called for a probe into the matter.

UK court denies Venezuela access

Vice President Delcy Rodriguez said Maduro had “asked the Venezuelan courts to immediately open an investigation with the aim of determining the criminal responsibility of those participating in this blatant piracy of Venezuelan gold.”

The Maduro-appointed central bank board lawyer Sarosh Zaiwalla said Thursday’s judgement “entirely ignores the reality of the situation on the ground.”

“Mr Maduro’s government is in complete control of Venezuela and its administrative institutions, and only it can ensure the distribution of the humanitarian relief and medical supplies needed to combat the coronavirus pandemic,” he said.

He added: “This outcome will now delay matters further, to the detriment of the Venezuelan people, whose lives are at risk.”

Lawyers representing the Maduro government said they would appeal against the ruling. 

Venezuela descended into political turmoil after Guido unilaterally declared himself “interim president” of the country in January last year.

The US, which quickly recognized Guaido’s self-proclaimed presidency, has imposed several rounds of crippling sanctions against the oil-rich country in an attempt to oust Maduro and replace him with Guaido.

The sanctions, which include the illegal confiscation of Venezuelan assets abroad and an economic blockade, have caused enormous suffering for millions of people in the country.

Last year, the US also backed and helped a small group of rogue soldiers to launch a coup — which failed — against the elected government.

There was also an attempt at assassinating the president with a drone in 2018.

The latest attempt against the country came this year, when US-backed mercenaries tried to invade the northern state of La Guaira using high-speed boats. Venezuelan forces, however, foiled the attempt.

The administration of US President Donald Trump has been openly calling for the ouster of Maduro.

UK court denies Venezuela access

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