December 8, 2022


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Virus Disrupts Travel and Trade Between U.K and Europe


By: Ella Koeze·Source: Refinitiv

Financial markets were jolted on Monday after the emergence of a fast-spreading coronavirus variant led to the suspension of some trade and travel with Britain as well as another lockdown in London, a new threat that overshadowed progress in Washington toward a long-awaited economic aid package.

But after falling sharply at the start of trading, Wall Street’s major benchmarks mostly recovered before ending the day mixed.

The Dow Jones industrial average recouped all of its early losses to finish slightly up for the day, and the S&P 500 index declined 0.4 percent, its second straight decline near the end of a tumultuous year.

“The stimulus deal is a step in the right direction and significantly lowers the odds of a recession in the first quarter,” said Ryan Detrick, chief market strategist for LPL Financial. “Still, massive shutdowns in Europe are a harsh reminder we aren’t out of the woods yet.”

The retreat on Monday was sharper in Europe, where the Stoxx Europe 600 index dropped 2.3 percent. The FTSE 100 in Britain fell 1.7 percent, while the FTSE 250, which includes companies that are more oriented to the British economy, declined more than 2 percent.

The British pound slid as much as 1.8 percent against the dollar before recovering some ground.

The new lockdowns in Britain “raise the chances that the economy stagnates, if not contracts, in the first three months of 2021,” Ruth Gregory, senior U.K. economist at Capital Economics, said in a note.

Over the weekend, nearby countries shut their borders to travelers from Britain as London and the surrounding area were put into a lockdown after the government’s health secretary said a new strain of the coronavirus was “out of control.” France also stopped freight imports from Britain, a move that will worsen border disruptions and has raised concerns about the supply of fresh food.

By Monday, some countries outside Europe also began to close their borders. Israel said most foreign nationals wouldn’t be allowed to enter after Wednesday, while Saudi Arabia announced a one-week ban on all international travel

But concern about the economic impact of such restrictions didn’t weigh on Wall Street quite as heavily as it did in Europe, in part because of the fact that congressional leaders have reached a deal on a $900 billion stimulus package, which is expected to include $600 stimulus payments to millions of Americans and strengthen unemployment benefits.

The congressional spending package is expected to include most of the elements that economists have long said were crucial to avoiding further calamity and aiding a recovery. It extends unemployment benefits for millions at risk of losing them, and adds money to their checks to help pay their bills. It revives the Paycheck Protection Program, which kept many small businesses afloat in the spring.

Trading in the U.S. did reflect some concerns about the new restrictions in Europe. Shares of Airlines, cruise lines and casinos — companies that will be hardest hit by travel restrictions — fared poorly. As crude oil prices retreated, reflecting worry about the global economy, energy stocks were also among the worst performers.

But another factor was also weighing on the S&P 500 on Monday — the addition of Tesla to the index.

With a market cap of more than $600 billion, Tesla is the largest ever addition to the index, requiring roughly $90 billion worth of trading as fund managers who have to try and match their holdings to the index have to sell other stock.

Gainers were concentrated in the financial sector, after the Federal Reserve on Friday said that the country’s largest banks were sturdy enough financially to survive a severe economic shock related to the pandemic. The Fed will allow them to return more money to shareholders in early 2021 as long as the banks show that they are profitable.

U.K. Virus Crisis

Trucks in England parked along a highway leading to the Port of Dover. The port was closed after France said it would prohibit freight from Britain, which is trying to stop the spread of a variant of the coronavirus.
Credit…Steve Parsons/Press Association, via Associated Press

British shoppers were warned Monday of the possibility of a “serious disruption to U.K. Christmas fresh food supplies” stemming from France’s decision to suspend all trucks arriving from Britain.

Consumers were advised by trade groups not to panic shop in the days leading to Friday’s Christmas holiday.

France is trying to stop the spread of a more contagious strain of coronavirus that Britain’s health minister said had grown “out of control” in parts of England. Over the weekend, Prime Minister Boris Johnson announced tighter restrictions on people living in London and the surrounding area.

On Sunday night, France suspended the arrival of goods that are transported by truck and cross the English Channel either via ferry or through the Eurotunnel, over fears the drivers could carry the disease. The rules are to last 48 hours.

As a result, the Port of Dover, just 21 miles across the Channel from France and one of Europe’s busiest ferry ports, with just two operators moving 10,000 trucks each day, was closed to outbound traffic on Monday. About 20 miles west, the transport hub at Folkestone, connected to France by the Eurotunnel, was also closed. Truck drivers bound for the continent parked along the roadways leading to Dover, in a procedure known as Operation Stack that was devised to deal with potential disruptions caused by Brexit.

Grant Shapps, Britain’s transport minister, said about 20 percent of the freight moving in and out of England was affected by the closures. Unaccompanied goods — such as those loaded in shipping containers, carried on vessels — will continue to be admitted into France and goods can still be driven to other countries, such as the Netherlands, from smaller ports.

Still, Britain relies on imported fresh fruit and vegetables trucked in from Europe, especially in the winter. Food can still be taken by truck from France into Britain, but there are concerns truck drivers won’t go if they risk getting marooned in Britain.

The travel ban has “the potential to cause serious disruption to U.K. Christmas fresh food supplies — and exports of U.K. food and drink,” Ian Wright, the chief executive of the Food and Drink Federation, said in a statement.

The closure of ports is also disrupting parcel deliveries. Deutsche Post DHL said deliveries of parcels to Britain would also be stopped as more countries impose travel bans on Britain.

Mr. Johnson said on Monday afternoon that “the vast majority of food, medicines and other supplies are coming and going as normal.” In a news conference, Mr. Johnson added that he was in touch with President Emmanuel Macron of France to try to find a way to get goods moving again “as fast as possible.”

The impact is also being felt in France, where shipments of fresh fish and shellfish will not arrive. Britain sends more seafood to the European Union than it imports, especially stocks of salmon, lobster and langoustines. A Scottish salmon trade group warned that more than £1 million of fresh salmon would be caught up in the port closure during this peak season.

The BBC reported that Sainsbury’s, one Britain’s largest supermarkets, said food for Christmas was already in hand, but if the travel suspension lasted longer, there would be “gaps over the coming days” in items such as lettuce, salad leaves, cauliflowers, broccoli and citrus fruit.

About a quarter of food consumed in Britain is imported from the European Union, Research from the London School of Economics estimated that more than half of the tomatoes, onions, cucumbers, mushrooms, peppers and lettuce Britain consumes are imported. And 75 percent to 100 percent of these were from the European Union last year.

Because Britain is set to end its transition period for leaving the European Union on Dec. 31, importers of many goods, including medicines, had already been stockpiling. London and Brussels haven’t reached a trade deal yet, and so importers have sought to get goods into the country ahead of customs checks and, potentially, new tariffs, actions that have caused delays and congestion at larger container ports.

U.K. Virus Crisis

Passenger numbers on the Eurostar have plunged 95 percent since March.
Credit…Suzie Howell for The New York Times

A bad year for Eurostar, the international high-speed train, turned worse on Monday.

The sleek and speedy mode of travel that ties London, Paris, Amsterdam and other cities is a shadow of itself, crippled by the pandemic:

  • Its ridership has all but vanished.

  • Its finances are threatened.

  • More than 90 percent of its employees have been furloughed, one of its union said.

Heightening the crisis, all service from London to Paris, Brussels and Amsterdam was suspended on Monday for at least 48 hours as governments on the continent banned travelers from Britain, a precaution as health officials try to control a new variant of coronavirus sweeping across parts of England. Trains will continue operating from Paris to London, the company said.

The company’s woes reflect a struggle for survival playing out across the European train industry, as the pandemic continues to upend the business of transportation. Like Europe’s airlines, the railway sector is facing its worst crisis in modern history, reports Liz Alderman for The New York Times.

Ridership has slumped 70 to 90 percent amid lockdowns and social-distancing requirements, pushing the industry toward a staggering 22 billion euros in losses this year, around the same expected for European airlines, according to CER, a Brussels-based trade group representing passenger and freight train operators. Thousands of trains have been mothballed, and tens of thousands of workers are on government-subsidized furloughs.

“It’s a totally extraordinary situation,” said Libor Lochman, CER’s executive director. “There is no comparison for it, and it can and will lead to the bankruptcy of a number of companies, unless there is the political will to prevent it.”

With more than nine billion passengers and 1.6 billion tons of freight carried on tracks stretching from Spain to Sweden, Europe’s trains are as vital as planes for whisking people and goods across the continent.

But even after the pandemic, analysts say work-from-home practices, online socializing and the rise of internet shopping will have a lasting impact on rail travel of all types, leaving privately owned companies like Eurostar and state railways including DeutscheBahn in Germany and SNCF of France, Eurostar’s biggest shareholder, struggling to survive.

The Department of Housing and Urban Development has extend a moratorium on evictions and foreclosures on home mortgages its insures against default, protecting many first-time home buyers.

The moratorium will now run through Feb. 28. It had been set to expire at the end of the month.

The foreclosure moratorium applies to mortgages backed by the Federal Home Administration, a division of the federal housing department. In recent years, F.H.A. guaranteed mortgages have become a major way for first-time buyers to acquire homes. The biggest underwriters of F.H.A. mortgages have been so-called nonbank lenders that are not affiliated with a major bank.

HUD is also similarly extending the deadline for cash-strapped homeowners to seek a reprieve from making full mortgage payments for up to six months.

The HUD extensions are just the latest efforts by government housing officials to help homeowners. Earlier this month, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, extended the foreclosure moratorium for home loans guaranteed against default by those two big mortgage finance firms through the end of January.

The stimulus legislation under negotiation in Congress is expected to contain measures to help renters as well.

Speaker Nancy Pelosi in the Capitol on Monday. After months of gridlock and debate, the House and Senate approved the spending measures on Monday night.
Credit…Stefani Reynolds for The New York Times

Both houses of Congress on Monday night approved a $900 billion stimulus package that would send billions of dollars to American households and businesses grappling with the economic and health toll of the pandemic.

The House approved the package first, followed just before midnight by the Senate, which voted in favor 97-1.

Treasury Secretary Steven Mnuchin said hundreds of dollars in direct payments could begin reaching individual Americans as early as next week.

The long-sought relief package was part of a $2.3 trillion catchall package that included $1.4 trillion to fund the government through the end of the fiscal year on Sept. 30. It included the extension of routine tax provisions, a tax deduction for corporate meals, the establishment of two Smithsonian museums, a ban on surprise medical bills and a restoration of Pell grants for incarcerated students, among hundreds of other measures.

Though the $900 billion stimulus package is half the size of the $2.2 trillion stimulus law passed in March that provided the core of its legislative provisions, it remains one of the largest relief packages in modern American history. It will revive a supplemental unemployment benefit for millions of unemployed Americans at $300 a week for 11 weeks and provide for another round of $600 direct payments to adults and children.

“I expect we’ll get the money out by the beginning of next week — $2,400 for a family of four — so much needed relief just in time for the holidays,” Mr. Mnuchin said on CNBC. “I think this will take us through the recovery.”

President-elect Joseph R. Biden Jr., who received a coronavirus vaccine on Monday with television cameras rolling, has insisted that this bill is only the beginning, and that more relief, especially to state and local governments, will be coming after his inauguration next month.

Lawmakers hustled on Monday to pass the bill, nearly 5,600 pages long, less than 24 hours after its completion and before virtually anyone had read it. At one point, aides struggled simply to put the measure online because of a corrupted computer file. The legislative text is likely to be one of the longest ever, and it became available only a few hours before the House approved it. Now that the Senate passed the bill, it will go to President Trump for his signature.

But with as many as 12 million Americans set to lose access to expanded and extended unemployment benefits days after Christmas, passage was not in doubt. A number of other pandemic relief provisions are set to expire at the end of the year, and lawmakers in both chambers agreed that the approval of the $900 billion relief package was shamefully overdue.

Over the summer, Speaker Nancy Pelosi of California and Mr. Mnuchin inched toward a relief package of nearly $1.8 trillion. But after a significant infusion of federal relief in April, Senator Mitch McConnell, Republican of Kentucky and the majority leader, and several Senate Republicans initially balked at the prospect of another sweeping spending package. With Republicans reluctant to spend substantial taxpayer funds and mindful of remaining united before the November election, Mr. McConnell refused to indulge anything more than a narrow, $500 billion package.

Ms. Pelosi and top Democrats, for their part, refused to entertain the targeted packages Republicans eventually put forward, and pushed to go as big as possible in a divided government. The election hung over all of the talks, with both sides not wanting to deliver the other party a victory that could buoy their chances.

And Mr. Trump, fixating first on his campaign, then his effort to reverse the election’s results, did little to corral Congress toward an agreement.

In the end, congressional leaders agreed to punt the thorniest policy issues that had long impaired a final agreement — a direct stream of funding for state and local government, a Democratic priority, and a broad liability shield that Mr. McConnell had long fought for.

“A few days ago, with a new president-elect of their own party, everything changed,” Mr. McConnell said on Monday. “Democrats suddenly came around to our position that we should find consensus, make law where we agree, and get urgent help out the door.”

As the negotiations dragged on, millions of Americans slipped into poverty, thousands of small businesses closed their doors and coronavirus infections and deaths rose to devastating levels across the country.

But Ms. Pelosi vowed that with Mr. Biden in office, Congress would revisit the unresolved debates and push for even more relief to support the country’s economic recovery.

“It’s a whole different world when you have the presidency because you do have the attention of the public,” Ms. Pelosi said in an interview. “I’m very optimistic about that because the public wants us to work together.”

The new coronavirus stimulus agreement being finalized by Congress would make a fresh attempt to help Black Americans and other minorities who have been especially affected by the pandemic.

According to summaries of the bill prepared by Democrats in the House of Representatives, $12 billion out of the $900 billion aid package will be set aside for Community Development Financial Institutions, known as C.D.F.I.s, which make loans and grants to people and communities frequently unable to get traditional banks to do business with them.

The new aid package would give $3 billion to the Treasury for the C.D.F.I. Fund, a pool of money that C.D.F.I.s can draw from to make loans. Another $9 billion would be set aside for the Treasury to make more targeted investments in C.D.F.I.s and Minority Development Institutions, which also help distribute loans and grants in communities neglected by traditional banks.

These changes should help the kinds of minority-owned businesses that struggled to get help under earlier relief efforts. The Paycheck Protection Program, for example, relied heavily on the banking system to hand out forgivable loans to small businesses. But that put many Black business owners at an immediate disadvantage because they lacked lending relationships with traditional banks.

Research by social scientists in Utah and New Jersey has shown that Black business owners had a harder time getting Paycheck Protection Program aid compared with white business owners, and a survey by community advocates revealed that many minority-owned businesses did not get the help they asked for.

C.D.F.I.s, which are often nonprofits, became the go-to lenders for these business owners as they tried stay afloat during pandemic-induced lockdowns. But the Treasury Department was slow to allow many C.D.F.I.s to participate in the Paycheck Protection Program, and Congress set aside only a tiny portion of the initial aid package specifically for them. Only later, with $10 billion apportioned to C.D.F.I.s in late May, as well as grants from big banks like Goldman Sachs, did many C.D.F.I.s have the capacity needed to help minority communities.

The Trump administration on Monday named 103 Chinese and Russian companies that will face restrictions on purchases of American goods and technology, as it continues to clamp down on commercial and technological ties with China in President Trump’s final weeks in office.

The administration introduced a regulation this year barring U.S. exporters from selling certain items, including software, aircraft engines and scientific equipment, to a to-be-established list of “military end users.” The new list contains 58 Chinese and 45 Russian companies, including some subsidiaries of the Aviation Industry Corporation of China, China’s state-owned airplane manufacturer. Exporters can obtain a license to continue selling products to the firms, but most of these applications are denied.

Wilbur Ross, the commerce secretary, said in a statement that the action was designed to help exporters screen their customers for companies that might be funneling goods to foreign militaries.

The Commerce Department “recognizes the importance of leveraging its partnerships with U.S. and global companies to combat efforts by China and Russia to divert U.S. technology for their destabilizing military programs,” he said.

The department said companies might be added or removed from the list based on a decision by a committee, with members drawn from the Departments of Commerce, Defense, Energy, State and, occasionally, Treasury.

In its final weeks in Washington, the Trump administration has been pushing through a variety of new restrictions on Chinese companies, some more far-reaching than others. On Friday, it added dozens of Chinese companies, including Semiconductor Manufacturing International Corporation, to an entity list that would restrict it from buying American products.

Alan Bergman, left, is now chairman of the movie division, while Alan Horn will be chief creative officer.
Credit…Alberto E. Rodriguez/Getty Images

Disney on Monday cleared up a lingering question at its movie division: Alan Bergman, 54, was named chairman, succeeding Alan F. Horn, 77, a venerable figure in Hollywood who has led Walt Disney Studios since 2012. Mr. Horn will continue to serve as chief creative officer.

“It has been an honor to lead the Walt Disney Studios over the past eight-plus years,” Mr. Horn said in a statement. “The time feels right to shift my focus solely to our enormous creative slate.” This month, Disney said the movie division would dramatically increase its output to supply Disney+, the company’s year-old streaming service, which has soared in popularity during the coronavirus pandemic.

Mr. Bergman joined Walt Disney Studios in 1996 and rose through the business affairs ranks, overseeing finance, technology, legal affairs and human resources. Most recently he served as co-chairman of the division, which includes Pixar, 20th Century Studios, Marvel, Lucasfilm, Blue Sky Studios, Searchlight Pictures, Walt Disney Animation, Disney live-action movies and Disney’s live stage shows. The heads of those units will report jointly to Mr. Bergman and Mr. Horn, Disney said. Mr. Bergman and Mr. Horn will report to Bob Chapek, Disney’s chief executive.

“With this new structure, we are ensuring a vital continuity of leadership,” Mr. Chapek said in a statement. Mr. Bergman said he was “grateful to take on the role” and thanked Mr. Chapek for “his continued support, especially during this challenging year.”

A spokesman declined to say how long Mr. Horn would serve in his role. The structure is reminiscent of how Disney recently handled succession at its highest level, announcing in February that Robert A. Iger would step down as chief executive to become executive chairman and focus on the company’s creative endeavors. Mr. Iger said he would exit entirely in late 2021, when his contract expires.

Under Mr. Horn’s leadership, Disney became Hollywood’s dominant movie company, by far. Last year, Disney controlled roughly 40 percent of the domestic box office, and seven of its releases took in more than $1 billion worldwide. Mr. Horn was formerly the top film executive at Warner Bros., where he oversaw the eight-film “Harry Potter” series and Christopher Nolan’s “Dark Knight” trilogy. Before that, he co-founded Castle Rock Entertainment, where movies included “When Harry Met Sally” and “A Few Good Men.”

Catch up

  • Peloton said on Monday it would acquire Precor, a Seattle-based fitness equipment manufacturer, to ramp up production of its stationary bikes and treadmills to keep pace with surging demand during the coronavirus pandemic. The deal, valued at $420 million, includes plans to acquire Precor’s factories in Whitsett, N.C., and Woodinville, Wash., which combined have more than 625,000 square feet of manufacturing space.

  • European regulators gave the green light to a merger of Fiat Chrysler Automobiles and PSA, the maker of Peugeot, Citroën and Opel cars, paving the way for shareholders of the two companies to vote on the deal at a special meeting on Jan. 4. The European Commission said the transaction can go ahead, but with conditions. To preserve competition in the market for commercial vehicles, PSA must continue to allow Toyota to build vans and light trucks at its factories in Europe, and PSA and FCA must share specialized tools so that outside firms can do repairs.

  • The Federal Reserve said on Friday that the financial system’s biggest banks had the wherewithal to withstand a severe economic shock from the pandemic, and that they would be able to return more money to shareholders early next year as long as they showed that they were profitable. In June, the Fed put temporary caps on shareholder payouts by the nation’s biggest banks. Minutes after the regulator’s announcement on Friday, JPMorgan Chase said it would buy back $30 billion of its shares during the first three months of 2021.

  • In a novel case, federal prosecutors on Friday brought criminal charges against an executive at Zoom, the videoconferencing company, accusing him of engaging in a conspiracy to disrupt and censor video meetings commemorating the Tiananmen Square massacre. He is accused of working with others to log into the video meetings under aliases using profile pictures that related to terrorism or child pornography. Afterward, Mr. Jin would report the meetings for violating terms of service, prosecutors said.


Tesla shares had a huge rise this year, but the stock is volatile.
Credit…Aly Song/Reuters

On Monday, Tesla became the largest company ever added to the S&P 500, with a market capitalization of $650 billion. The company’s stock, up some 700 percent in 2020, fell 6.5 percent on Monday.

Companies worth a fraction of Tesla would have been included in the index long ago, but the approach that has made it such a valuable company has brought challenges.

Despite all its technological innovations, Elon Musk’s celebrity billionaire aura and a high-risk, high-reward approach to business, Tesla for the longest time was unable to meet the most humdrum requirement of corporate America: turning a profit. Criteria for inclusion require the sum of the company’s fully audited profits in the four most recent quarters to be positive. Tesla hit that mark only this year.

With a market capitalization of $650 billion, the sudden weight Tesla will throw into the market could have strange consequences.

“This is by far the biggest index inclusion that they’ve ever attempted,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn. “The stock will immediately be a top 10 name in the S&P, which is nuts.”

Chris Mack, a stock portfolio manager at the investment adviser Harding Loevner in Bridgewater, N.J., has plenty of good things to say about Tesla as an innovative company. But he doesn’t own the shares in his funds, which is focused on buying large cap technology companies that have a proven track record of profitability, making them suitable for long-term holdings.

But many investors won’t actually have a choice about buying Tesla’s shares.

The S&P 500 is one of the most widely followed barometers of the American stock market, serving as the benchmark against which investors measure more than $11 trillion worth of investments. Of that, more than $4.5 trillion are in index funds that mirror the stocks in the S&P.

Those funds have been buying up shares of Tesla since mid-November in preparation for Tesla’s admission to the S&P 500, which has sent its shares up more than 60 percent since the announcement that the company would be included.