War footing for Bailey
AS THE Covid-19 crisis erupted, few would have predicted that central banks would end up front of stage. The ongoing volatility on financial markets has given them a key role.
In his third day as Governor of the Bank of England, Andrew Bailey displayed the assertiveness which he never quite discovered in his previous job at the Financial Conduct Authority.
In what amounted to quantitative easing for corporate Britain, he vowed the Bank was ready to pump unlimited money into the economy via the £330bn commercial paper facility unveiled by the Chancellor less than 24 hours earlier.
The Bank would seek to make sure that Covid-19 does not have a destructive impact on growth. In spite of the heavy artillery deployed by central banks, it is proving virtually impossible to halt market gyrations.
Share prices in London fell another 4pc, the Dow tanked 7pc, and Brent crude oil prices touched $25.68, down 10pc – its lowest for 17 years. The pound plummeted to $1.17, its worst level in three decades.
The freeze of withdrawals on a raft of property funds, trapping £13.6bn of assets, provided a graphic illustration of how illiquid some markets have become. In the US, the Federal Reserve has revived a tool allowing dealers in government debt to raise cash directly from the central bank in exchange for portfolios of shares, local authority bonds and corporate bonds.
It is a symbol that the US central bank is ready to do what it takes to prevent the financial crisis, part two. The modest response, until now, from the European Central Bank (ECB) has evoked memories of the chaos in 2011 when the single currency area looked as if it might disintegrate under pressure from debt in Greece.
The interest rate yield on ten-year Italian government bonds has climbed by 0.56pc, the biggest such jump since 2011. The opening of an ever-bigger chasm between German
bonds and those of Italy led to speculation that ECB president Christine Lagarde will reactivate the European Stability Mechanism which could offer emergency credit lines to troubled economies.
The difficulty western democracies are having in getting a grip on the emergency suggests the Covid-19 doom loop, feeding into the money markets, is far from over.
Hot seats
A CRISIS can speed decision-making. At HSBC, where chairman Mark Tucker faced criticism for delaying confirmation of Noel Quinn as chief executive, the deed has been done. And at Centrica, chief executive Iain Conn is making way for finance director Chris O’Shea and the company has slotted in a new chairman, Scott Wheway.
Tucker was cautious about choosing a successor for chief executive John Flint, having made a wrong choice last time. Rather than follow the HSBC way of Buggins’ turn he wanted to benchmark Quinn against global candidates.
HSBC, with its international reach, is not quite like other UK banks. Authorities in Hong Kong, New York and London needed to be satisfied.
As interim CEO, Quinn had to execute a reorganisation including the loss of 10pc of staff. Given current events he might have gone even deeper. In the present market rout HSBC has fared considerably better – shares are down 16pc – than global counterparts Standard Chartered, down 36pc, and Citibank, where the shares have halved.
Investors have noticed that when it comes to Covid-19, first-in has become first-out, with China, Hong Kong and other Asian states bouncing back.
At Centrica it is some months ago that Conn indicated he would step down after five torrid years which have seen epic changes in the UK domestic energy market. He has taken blame for vanishing customers and a dividend cut. It could have happened to anyone.
Healthy option
EMIS is not a familiar name to many investors. But the firm, established by two Yorkshire clinicians three decades ago, is the medical equivalent of Sage, which provides financial software to smaller enterprises.
The Emis software is at the core of the general practice and pharmacy response to Covid-19. The firm does not expect to profit from the crisis but its website is filled with advice for health professionals.
Revenues are on the rise, climbing 7pc to £159.5m last year.
What the defunct NHS computer failed to do, Emis seems capable of achieving.