AIRLINES
Lufthansa bailout approved
Deutsche Lufthansa AG shareholders on Thursday backed a 9 billion euro (US$10.1 billion) government bailout, securing the future of Germany’s flagship airline after it was brought to the brink of collapse by the COVID-19 pandemic. The plan, backed by 98 percent of the shareholder capital that cast a vote at the online meeting, would see Berlin take a 20 percent stake in Lufthansa and two board seats. Lufthansa shares closed 7.1 percent higher after top shareholder Heinz Hermann Thiele dropped objections to the deal. Also on Thursday, EU regulators approved Lufthansa’s 6 billion euro recapitalization, part of the bailout deal, subject to a ban on dividends, share buybacks and some acquisitions until state support is repaid. German Minister for Economic Affairs and Energy Peter Altmaier said it was clear that with the state holding a minority stake, Lufthansa would remain an independent company, but the deal made it possible to prevent a hostile takeover.
RETAIL
H&M posts US$700m loss
Hennes & Mauritz AB (H&M) posted its first quarterly loss in more than a decade as the COVID-19 pandemic forced the Swedish clothing retailer to close of many of its stores. The pretax loss amounted to 6.48 billion kronor (US$700 million) in the three months through May. Analysts had expected a loss of 6.1 billion kronor. H&M gave a mixed bag of positive and negative news. The sales decline moderated to 25 percent so far this month from 50 percent in the past quarter. H&M added that it would close more shops, targeting a net decrease in its store count this year of 40. However, its long-term issue of holding too much inventory is still haunting the company. H&M is laying the groundwork for a debut issue of bonds and it said it set up an extra commercial paper program to be able to borrow in currencies other than Swedish kronor.
MEXICO
Central bank cuts rate
Mexico cut its benchmark interest rate to the lowest in almost four years to counter its worst economic crisis since the 1930s. Banco de Mexico, or Banxico, lowered its policy rate by half a percentage point to 5 percent in a unanimous decision, as forecast by all 21 economists in a Bloomberg survey. The decision is the fourth such cut since the COVID-19 pandemic hit the country. The Mexican economy would shrink 10.5 percent this year, more than peers such as Brazil, Russia, South Africa and India, according to the IMF. Despite that, swaps traders are betting that Banxico would not lower the rate below 4.25 percent, as the inflation outlook worsens.
FINANCE
Visa may cut Wirecard
Visa Inc and Mastercard Inc are considering revoking Wirecard AG’s ability to process payments on their networks in a move that would cause further pain for the firm after it started insolvency proceedings. The world’s largest payment networks have begun reaching out to some Wirecard clients to prepare them for the possibility, said people familiar with the matter, who asked not to be named because the information is not public. Wirecard helps businesses around the world accept electronic payments from customers, so its relationships with Visa and Mastercard — and being able to process payments with the companies — are critical to its business. Wirecard filed for insolvency on Thursday, citing over-indebtedness and inability to assure it can continue as a going concern.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure
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