Disastrous economic data weigh on the Dax

Frankfurt The series historically poor economic datathat investors currently have to digest does not stop. That is also a burden for the German Leading index Dax. The stock market barometer closed on Friday 1.7 percent lower at 10,336 points.

“This drug had recently made a significant leap on the stock markets,” said Thomas Altmann, portfolio manager at QC Partners. “Therefore, this announcement is a clear warning to all euphoric investors.”

The puzzle is only slowly completing, how badly the corona pandemic is paralyzing the global economy. It was announced on Friday that the UK retail collapsed by more than four percent in March compared to the same period in the previous year – a decline that was not achieved even in the 2008 financial crisis.

Also in Japan the retail sector is idle: Merchants in the capital city of Tokyo reported a drop in sales of almost 35 percent in March. A similar decline to this extent is not to be found in the Bloomberg financial services time series.

There were also bad numbers from industry on Friday: The European commercial vehicle market fell almost half in March due to the coronavirus pandemic. With 105,196 vehicles, 47.3 percent fewer were registered than in the same month last year, the responsible industry association Acea announced on Friday in Brussels.

The number of registrations had already declined in January and February, but the decline in March was again considerably greater. The falls were most pronounced in the countries particularly hard hit by the Covid 19 pandemic: Italy (minus 66.1 percent), Spain (minus 64.4 percent) and France (minus 63.1 percent).

The managers surveyed by the Ifo Institute also assessed their situation as worse and are also more skeptical about the future. The published on Friday Ifo business climate index for April fell more clearly than expected: from 85.9 points in March to 74.3 points. That’s the lowest value ever measured. Economists interviewed by the Reuters news agency had expected a drop to 80.0 points. “The mood among German companies is catastrophic,” said Ifo President Clemens Fuest.

On Thursday, the GfK consumption barometer in Germany and the purchasing manager indices for the European service sector signaled that Germany and Europe were heading for a severe recession. The European Union is steering because of the corona crisis, according to EU Industry Commissioner Thierry Breton towards a drop in economic output of five to ten percent.

In addition, investors are also looking at the Federal Chancellor. Angela Merkel consults with representatives of business and trade unions on the corona crisis. This could also involve possible further easing and economic policy measures.

Look at the individual values

Deutsche Bank and Commerzbank: The rating agency Standard & Poor’s (S&P) has given it a thumbs-up because of the economic impact of the corona crisis at Commerzbank, Deutsche Bank and other German financial institutions. In the Commerzbank S&P downgraded the credit rating by one grade to “BBB +”, the outlook remains “negative”, as the credit rating officers announced on Thursday.

At Deutsche Bank, S&P confirmed the rating of the creditworthiness with “BBB +”, but lowered the outlook to “negative” from “stable”. While the creditworthiness guards doubt that Commerzbank can implement its new strategy “Commerzbank 5.0”, including the planned sale of the Polish subsidiary M-Bank, as planned, they see the restructuring of Deutsche Bank basically on track. The shares of the two largest German financial institutions fell by 6.8 percent (Deutsche Bank) and 4.1 percent (Commerzbank) and were among the biggest losers on the stock market on Friday.

Lufthansa: Down eight percent it went for the papers from Germany’s largest airline. So that leads Lufthansa the Dax’s list of losers. At € 7.20, the shares cost less than they had since the Sars pandemic 17 years ago. According to insiders, the airline plans to put together a government aid package of up to ten billion euros early next week. The loss increased to EUR 1.2 billion in the first quarter. Due to the pandemic, air traffic in Germany is almost completely stopped.

Nestlé: The Swiss food giant, on the other hand, is doing very well. Nestle accelerated its growth in the starting quarter 2020. Organic sales growth in the first three months was 4.3 percent, as Nestle announced on Friday. The share rose 1.8 percent. As the full impact of the Covid 19 pandemic could not yet be assessed, Nestle is tentatively sticking to the original outlook for 2020 as a whole. The Group expects organic sales growth and the underlying operating profit margin to improve.

Sanofi: The French pharmaceutical company benefits from the strong demand for painkillers and antipyretic due to the spread of the coronavirus. In the first quarter, currency-adjusted profit rose by 16.1 percent to 2.04 billion euros Sanofi announced. Sales climbed 6.6 percent to EUR 8.97 billion. Around half of the profit and sales growth is due to the corona pandemic. The corona effect will subside in the course of the second quarter. Sanofi confirmed the forecast for 2020. The group has set itself a five percent increase in earnings per share. The papers climbed 1.9 percent.

Eni: The Italian oil company the corona pandemic and collapsing oil prices drove a billion dollar loss in the first quarter. The net loss was 2.9 billion euros, as the Italian company announced on Friday in Rome. Had in the previous year Eni earned just under 1.1 billion euros. For example, Eni had to adjust the book value of its oil inventories to falling market prices, as well as depreciation on oil and gas activities. Adjusted, Eni achieved a small plus of 59 million euros, a fraction of the previous year’s profit of 992 million euros. Revenues plummeted by a quarter to around 13.9 billion euros. The stock lost 2.9 percent.

Look at other asset classes

Oil prices continued their recovery from the previous day on Friday despite the price losses in the meantime. The decisive factor on Wednesday, however, was not the easing of weakness in demand and excess supply, rather political tensions between the USA and Iran caused rising risk premiums for crude oil. In Asian trade, a barrel (159 liters) of the North Sea type Brent last cost $ 21.57, up 1.1 percent. The US WTI was traded at $ 17.09 per barrel, up 3.5 percent.

The euro exchange rate rose slightly on Friday. The European common currency was trading at $ 1.0804 in the late afternoon. The European Central Bank (ECB) set the reference rate on Friday at $ 1.0800 (Thursday: 1.0772).

Italy’s central bank Market insiders broadened their purchases of domestic government bonds on behalf of the ECB on Friday. The Banca d’Italia is buying slightly more titles on average than in the past few days, said a primary trader. A second insider said that she was more active on the market. Yields on ten-year bonds fell around ten basis points over the course of the day to 1.899 percent. They had previously climbed above the two percent mark when disappointment over the results of the EU summit on Thursday spread on the bond market.

With agency material.

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The Ramadan austerity program could lead to a recession

Berlin When the crescent moon can be seen above Mecca this Thursday, Ramadan begins. For the 1.5 billion Muslims, the holy fasting month is influenced by the corona crisis in a similar way to Easter for Christians.

There were hardly any Easter celebrations in Europe two weeks ago. Now the world-famous mosques in the holy places of Mecca and Medina in Saudi Arabia remain closed, as do most places of worship for Sunnis and Shiites.

The world-famous Kaaba in Mecca, a central place of pilgrimage for Islam, does not open either. Dense crowds of people pilgrimage around the black cube every day, but now the space is empty – this has never happened before during Ramadan.

But especially in the Arab world, the economic consequences of the corona-related Ramadan austerity program are far more devastating than the Easter holidays in Christian countries. At Iftar, the breaking of fasting every evening, rich families on the Gulf often invite you to a noble meal in luxury hotels, many also fly to relatives and friends in their residences on the other side of the globe. Pilgrimages to the holiest mosques, the hajj, are prohibited. But these rituals are now canceled because of the virus.

Abdul Latif al-Sheikh, Saudi Arabia’s Minister for Religious Affairs, announced that all Muslims in his country can only pray at home during Ramadan. Any gatherings or prayers together in the country’s mosques are prohibited during the month of Lent. “Our hearts are crying,” said Ali Mulla, the muezzin – the prayer caller – of the Great Mosque of Mecca because of the forced closure.

Big sales during Ramadan

Meanwhile, the Dubai government announced on Thursday that the temple of consumerism – the famous, world’s largest shopping malls – is now on stand-by for reopening. The centers are therefore preparing to open – under strict conditions.

During Ramadan, when people fast during the day and actually pray several times in mosques and eat and celebrate all the more after sunset, sales in the Muslim world are by far the highest sales in the Muslim world for retail.

Already in the previous years, a lot of retail sales had been redirected to online retail, in the two previous years alone, e-commerce had doubled in the Gulf States during Ramadan.

Since the outbreak of the corona crisis, life retail chains such as the French, which are strongly represented in the Gulf, have also been involved CarrefourGroup, online sales have increased dramatically. Driving services like Over or Careem, which comes from Dubai and has been taken over by the US industry leader, is now increasingly transporting food and medicine purchases to private customers instead of passengers.

In the shadow of the crisis, a consortium led by Sheikh Tahnoon Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family, the main emirate of the United Arab Emirates (UAE), bought around a fifth of the Gulf retail chain Lulu for around one billion on Thursday accepted. With Lulu, the Indian entrepreneur Yusuff Ali became a billionaire.

Economic burden

Saudi Arabia’s sovereign wealth fund PIF, meanwhile, started a shopping tour with European and American groups shortly before the fasting month: Riyadh’s billion-dollar PIF has large packages with the cruise company Carnival and with European oil companies like Equinor, Total, Eni and Shell and bought the majority at the British football club Newcastle United.

Whether the billion-dollar carousel consumption in stationary shops is picking up again and how strongly sales are slumping due to canceled Iftar fasting festivals and travel bans mainly depends on the further spread of the corona virus: So far, the number of infected and dead people in the Gulf has continued to increase, but is With 12,272 cases so far in Saudi Arabia alone, it is even behind those in small Israel and above all significantly behind the vast majority of European countries.

Economically, however, the Gulf States suffer extremely. Emirates, the world’s largest provider of intercontinental flights from the UAE Emirate of Dubai, has buried its hope of significantly expanding flight operations again shortly.

So far only a few homecoming flights have been made. According to the magazine “Arabian Business”, scheduled flights are to be started up slowly on July 1 at the earliest. Etihad, the Abu Dhabi airline and its distressed holdings such as Alitalia and Virgin Australia, is suffering even more severely. The low-cost airlines flydubai and Air Arabia from the Emirate of Schrjah also had to largely discontinue flight operations.

Aviation and trade are the most important sectors for Dubai. Abu Dhabi, Iran and Saudi Arabia are mainly dependent on the oil business. And the violent turmoil on the oil markets is putting considerable strain on the largest economies in the Gulf: Saudi Arabia, the world’s largest oil exporter, is likely to more than double its budget deficit to 15 percent of GDP due to the demand shock caused by the corona crisis. Mohamed Abu Basha, head of macroeconomic forecasts at Cairo Investment Bank EFG Hermes, believes that.

The unexpectedly violent oil price shock “changed everything,” says Monica Malik, chief economist at Abu Dhabi Commercial Bank. “The recent upturn was largely due to the fact that the oil price was over $ 50-60 to support economic activity, and that has only just been decimated.”

Actually, the vast majority of economists and entrepreneurs in the Gulf had an economic recovery in 2020 after years of weak growth. Now forecasts predict an at least three percent recession in Saudi Arabia.

Saudi Arabia has to incur more debt

But Riyadh’s finance minister Mohamed Al-Jadaan officially sees it as loosely: “We have been through worse things,” says Al-Jadaan, referring to previous oil price crashes and a budget deficit of 17 percent in 2016. His country, which is currently trying to support companies with billions of euros in bailout funds, be financially strong enough to master the crisis.

Saudi Arabia could expand its debts significantly this year. So far, the country only has a national debt of around one fifth of GDP – Europe’s Maastricht criteria, which are often broken, allow EU countries 60 percent.

Saudi Arabia could record $ 58 billion in debt in 2020. Almost half have already been raised via bonds on domestic and international capital markets. The UAE has also recently placed multi-oversubscribed billion-dollar bonds.

It is an open question whether at least the sugar festival, the traditionally generous end of Ramadan, can be celebrated publicly and economically. Only prisoners are lucky: Dubai Emir, Sheikh Mohammed, released 874 prisoners on the occasion of the beginning of Ramadan.

More: The Saudi Crown Prince is considered hungry for power and hardly predictable. Now he should have missed it with US President Donald Trump.


Saudi State Fund buys shares in European oil companies

Salman bin Abdelasis al-Saud, King of Saudi Arabia

With the sovereign wealth fund, Saudi Arabia wanted to position itself more independently of oil.

(Photo: dpa)

Bangalore Saudi Arabia’s sovereign wealth fund PIF has been loud “Wall Street Journal” Secured stakes in four major European oil companies totaling approximately $ 1 billion.

It is about Equinor from Norway, the British-Dutch energy giant Royal Dutch Shell, Total from France and Italy EniCorporation reports, citing individuals familiar with the matter.

A Saudi government official is quoted as saying that similar transactions could also be carried out in the future. Initially, no one was available to comment on the companies.

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A massive wave of consolidation threatens in the oil industry

Oil production

h The situation in the corona crisis worsens every day.

(Photo: dpa)

There is still no end in sight to the global corona pandemic. This also affects the oil industry, whose situation deteriorates every day the virus rages in North America, Europe, India and elsewhere and billions of people are virtually locked in their own four walls.

Despite China’s recent thirst for oil, the oversupply of black gold is growing steadily. The dramatic fall in the oil price and stock exchange prices in the energy industry speak volumes. The Organization of Petroleum Exporting Countries (Opec), Russia and the United States are watching the debacle almost helplessly in need. The rising oversupply is unhinging the previously somewhat functioning global power balance of the oil industry. A huge wave of consolidation threatens.

The oil multinationals are simply panicking in view of the completely open development. In their distress, they turn over each petrodollar three times. No matter whether industry giants like Shell, Total BP and Chevron or medium-sized companies like the Austrian one OMVwho have favourited Italian Eni or the Spanish Repsol: everyone is putting all their brakes on the cost brakes in order to remain able to act in this unique crisis.

Even Venezuela, which has its back to the wall economically, is forced to cut production. Because the bearings overflow with oil worldwide.

In addition: Opec heavyweight Saudi Arabia and Russia collapsed at the beginning of the corona crisis. Since then, the Opec plus alliance has been history. You have started a price war that makes no sense in this extreme market situation. It may well be that we will still see historical lows in the oil price if the corona crisis in the major industrialized countries should drag on for several months.

In the extraordinary time, extraordinary steps are necessary to prevent misalignments of companies and states. It would therefore make sense to initiate a global oil conference with all key market participants in order to ensure maximum stability. A mutual dialogue – from the oil multinationals to the state corporations to the US shale oil producers including the relevant producing countries – is urgently required.

To do this, some self-centered market participants have to jump over their shadows. But with each day in the corona crisis more, previously unimaginable developments become possible. Why not take a constructive approach on the oil market for the benefit of the economy and the state? After the corona crisis, the world of oil will look different. Now there is still the chance to design them.

More: Reason should prevail in the oil price dispute between Russia and Saudi Arabia.


Isra Vision obtains ban against ISS ESG agency

Frankfurt The dispute started with an email: An employee of the eco-rating agency ISS ESG wrote to the Darmstadt optics group that they were planning to publish a sustainability rating about the company Isra vision. The ISS analyst added whether Isra Vision would like to participate in the creation of the rating. Isra Vision, manufacturer of camera technology, sensors and software for industrial robots, ignored the email, presumably assuming that it was a marketing mesh.

Two weeks later the rating was fixed: “D–”, the worst grade that ISS ESG gives to companies. Isra Vision, which started as a spin-off from the Technical University of Darmstadt and is now a listed technology group with 800 employees and 150 million euros in annual sales, should be among the companies in the industry that pay the least attention to sustainability.

Enis Ersü, founder and CEO of Isra Vision, did not want to put up with this, turned on lawyers and obtained a ban in a snap. On Tuesday, therefore, there was a showdown between the organic rating agency and the technology group in front of the Munich Regional Court (AZ: 39O8981 / 19).

Prohibition remains

A verdict should only be made in two weeks. But the Munich District Court tended to follow Isra Vision’s view. The rating ban will remain in place, said Jens Matthes, lawyer for Isra Vision, the Handelsblatt. He emphasizes: “We are not concerned with preventing sustainability ratings. But we want reporting to be clean and meaningful. ”

ISS ESG’s lawyer, Christoph Rieken from the Noerr law firm in Munich, told Handelsblatt that the decision only affected the specific rating. But after Isra Vision dropped out of the TechDax, the rating no longer had any meaning for ISS: “It is not that the methodology or the business model is in danger.”

Nevertheless: It is the first publicly known case in Germany in which a company legally defends itself against a sustainability rating. The legal dispute highlights the booming eco-rating industry. More and more investors have committed to making investment decisions based on so-called ESG criteria. The abbreviation stands for the English terms for environment, social affairs and corporate governance. The Swiss asset manager Vontobel estimates that up to $ 30 trillion had been invested according to sustainability criteria by the end of 2018. Tendency: increasing rapidly.

In order to be able to assess whether companies are doing business sustainably, many investors rely on the assessment of specialized rating agencies. Sustainalytics, ISS ESG and the index provider MSCI are the market leaders. The agencies have to cover more and more companies and markets in order not to fall behind in the competition.

ISS ESG needs to be improved

According to its own information, ISS ESG has created sustainability ratings for over 5,000 listed companies. From over 800 criteria, ISS ESG 100 selects suitable criteria for the company and the industry. These include, for example, the shareholder structure, the rights of workers, the proportion of women in management positions, but also the treatment of toxic waste and the control of the supply chains of raw materials from civil war countries.

ISS ESG collects all the publicly available information on these categories, weights them and forms an overall grade from “A +” (“excellent”) to “D–” (“poor”). “D” is the most frequently assigned rating, according to ISS ESG. So far, no company has complained. Except for Isra Vision.

The Handelsblatt has a revised rating from Isra Vision. After the Darmstadt responded to the grade “D–” with a warning, ISS corrected. But the revised rating with the grade “D”, about which ISS ESG and Isra Vision have now argued before the regional court in Munich, is also quite a challenge.

In it, an ISS analyst comes to the conclusion, among other things, that it is unclear whether the company has set up effective rules against insider trading and is responsible for the correctness of financial communication.
Many details from the individual categories paint a negative picture of Isra Vision: There is “no or insufficient information about accidents at work”.

The same applies to the question of whether workers are protected from toxic substances. There is also a “D–” for the sub-category “Suppliers”: “No or insufficient information” is about the question of whether Isra Vision can rule out that raw materials used come from conflict regions.

These and dozens of other categories alone do not apply to the Darmstadt company. At least that’s what Isra Vision lawyer Matthes wrote to the court in a statement. Matthes accuses the ISS of not having dealt with the business model intensely enough.

At Isra Vision, only finished components such as cameras, cables or sensors are combined into their own products, and the appropriate software is included. “In production, there is no flexing or welding.” Production workers are therefore neither exposed to toxic substances, nor isra Vision buying raw materials that could potentially come from war zones. Matthes criticizes that the rating agency assigns the worst grade “D–” whenever ISS ESG cannot find public information on certain categories.

Transparent methods

ISS ESG sees it differently. “The rating and its evaluation method are completely transparent,” writes ISS-ESG lawyer Rieken in a statement to the court, which is available to the Handelsblatt. Investors would not read from the grade “D” that Isra Vision is one of the worst companies on the market in terms of sustainability.

For many professional investors, the reference to missing information on ESG factors is just as important as the information itself. Not evaluating indicators because of missing information, as Isra Vision demands, is not an option, lawyer Rieken continues. This “would create the wrong incentive for companies to hide negative performance aspects in order to achieve a falsified better overall result”.

ISS ESG emphasizes: “The analysts are also actively talking to the respective companies during the rating process in order to give them the opportunity to comment on the results and to provide further information.” But even if such a conversation does not occur , the rating is published. Some competitors handle it differently.

A year ago, the rating agency S&P Global launched a product called “ESG Evaluation”. To this end, the S&P analysts also evaluate a large number of sustainability indicators and use them to form a rating on a scale from 0 to 100.

However, the personal interview of the analyst with the company is essential, says Tobias Mock, Head of Corporate Ratings at S&P Global. “Discussions with management and the supervisory board are part of the evaluation process,” he reports. Without personal discussions with the management, no assessment can be made.

In the dispute with Isra Vision, ISS refers to a positive example: the lighting company Osram, which the agency rates with “B–”, ie “good”. Among other things, Osram publishes a 66-page sustainability report. The much smaller report by Isra Vision, on the other hand, does not allow “due to its lack of substance” to conclude that the company “structures the topic of sustainability and addresses it emphatically”.

Isra lawyer Matthes replies, however, that Osram, with over 25,000 employees and an annual turnover of four billion euros, has completely different options than a medium-sized company to produce sustainability reports. The ISS approach “therefore leads to a structural preference for large companies”, he criticizes.

Eco-ratings are only a part of green finance – but the legal dispute says a lot about the hype that the topic of sustainability has triggered in the financial sector. The EU Commission is currently working on a taxonomy that could also specify how companies should report on sustainability goals.

Many in the industry warn that Brussels is too strict. As long as there are no rules, everyone defines sustainability differently. New dispute is programmed.

More: Rating agencies such as Moody’s and S&P are pushing into the eco-rating market.


Northern Italy is in a state of emergency

Rome Italy’s north is in a state of emergency. At the beginning of the week there is a fifth death and the number of those infected has risen to 219. The number of infections is primarily concentrated in the two northern Italian regions of Lombardy and Veneto.

Since eight o’clock on Monday, a total of eleven towns have been quarantined there – ten in Lombardy and one in Veneto. The civil protection crisis committee meets again at noon in Rome.

Prime Minister Giuseppe Conte is preparing for a further increase in the infected. “I don’t think the quarantine measures can be lifted in a few days,” said the prime minister.

Around 500 additional security forces are on their way north to control a total of 35 barriers to affected cities such as Codogno.

Codogno has around 16,000 inhabitants and is located 58 kilometers southeast of Milan in economically important Lombardy. “The situation is not easy because if Lombardy and Veneto are blocked, it means endangering 40 percent of Italy’s gross domestic product,” said entrepreneur Giordano Riello, chairman of the board of N-Plus, a technology startup, on a radio program Monday morning ,

Northern Italy is strong in exports

Lombardy and Veneto together generate 31 percent of Italian economic output, which is around 550 billion euros. Northern Italy is also strong in exports, accounting for 40 percent of total exports.

The two quarantined cities of Codogno and Castelpusterlengo alone generate 1.5 billion euros a year. Near Codogno is the headquarters of the mineral oil and energy company Eni and one of the major logistics centers of Amazon,

Security forces in Codogno

Additional security forces in northern Italy are supposed to control the blocked cities.

(Photo: Reuters)

There is also an infected person in the Italian economic metropolis of Milan. The city, like the companies in the region, took security measures. The Milan Cathedral and the Scala are closed, classes in schools and universities are canceled all week.

In Milan, most company bosses have given their employees in writing that they should work from home. That applies to the two big banks Unicredit and Intesa Sanpaolo, for the insurers Generali and Zurich, for the energy companies Enel and Eni and for the telecommunications giants Vodafone and wind that are located in the north. TIM is in Rome. Also Heineken and Luxottica urge their employees to do home office.

The tire manufacturer Pirelli, whose headquarters are in Milan, has put special security measures in place: business trips in Italy and abroad have been canceled for the coming days in order not to increase the risk of infection. All training measures are also canceled.

Canceled fashion shows

The fashion industry is particularly affected. The Milan fashion fair, where the big houses present the spring collection, ends this Monday. The fashion labels Armani and Laura Biagiotti let their shows take place as planned, but without an audience behind closed doors.

They were only broadcast in the livestream. All shows on Monday were canceled. Armani closes all production facilities in Milan and the surrounding area for a week, Gucci has not yet made a decision, the shoe manufacturer Tod’s relies on home office for its employees.

And the French luxury group LMVH, which many Italian brands of Bulgari via Fendi to Kenzo and Acqua di Parma, has instructed his managers not to go on business trips to Italy. The quarantined towns are deserted: banks, companies and shops there remain closed, only the ATMs work.

So far, China has been the center of infections, and there are also numerous cases in South Korea, Japan and now in Italy. The virus epicenter in China, the city of Wuhan and the surrounding Hubei region have been in quarantine for weeks.

Numerous airlines have suspended their connections to China. Italy was the first and only country in Europe to stop air traffic with China at the end of January.

Chinese businessmen cancel trips: At the Milan fashion fair, 1,000 Chinese buyers were fewer than last year, reports an industry service.

With the lack of tourists from China, the turnover figures of the luxury boutiques in Milan also decreased. A quarter would come from customers in China.

It is too early to quantify the damage in Italy, but the coronavirus hits the country at a time when the already weak economy is again on the way to recession. And the industrial heart of the country is in the north.

The government in Rome is already working on a “Marshall Plan” for the companies concerned and is considering tax relief and the suspension of loan payments – a permissible burden for the highly indebted state.

More: After the surge in the number of infected people in Italy there is an alarm. South Korea calls the highest alarm level because of the virus.