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Published on February 1, 2021 by Holly Porter

What’s been happening in the commercial world over the last two weeks? Read on to find out!

A Brief Summary of Davos 2021

From 24th-29th January, world leaders, politicians, economists and business leaders gathered, both virtually and in-person, to attend the 2021 Davos Conference.

The theme this year was ‘The Great Reset’ and the key issues discussed were:

  • COVID-19 vaccination
  • Job creation
  • Climate change

Several European leaders called for a greater collaborative effort in respect to these issues. Both Germany’s Angela Merkel and France’s Emmanuel Macron stressed the importance of international agreements and were optimistic that the newly inaugurated President of the United States Joe Biden would be more agreeable to this than his predecessor. The fact the President issued an executive order to re-join the Paris Climate Accord on his first day in office is indicative of this.

One controversial issue discussed was ‘vaccine nationalism’, with the aforementioned European leaders favouring a ‘multilateral approach’. South Africa’s president Cyril Ramaphosa was critical of richer countries hoarding vaccines and this week, tensions continued to grow between the UK and the EU over their own vaccine inequalities.

Other discussion points included the problem of low interest rates, the wavering confidence in financial markets as well as Donald Trump’s Twitter ban. EU Commission president Ursula van der Leyen disapproved of Big Tech’s power but warned the decision to remove Trump’s account was ‘a serious interference with freedom of expression’. She favours the drawing-up of a new, comprehensive regulatory framework to govern the information spread on platforms such as Twitter and Facebook.

What was discussed at Davos 2020?

Talking point: What else was discussed at Davos this year?


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New Vaccines

Whilst vaccination hoarding remains a controversial topic in UK-EU relations, there has been good news this week with the announcement of two new vaccines: Novavax and Janssen.

Novavax:

On Thursday 28th January, American vaccine development company Novavax revealed a vaccine which is 89.3% effective. The UK has secured 60million orders, which are due to be made at a manufacturing plant in Teesside, Northern England. Stockton North MP Alex Cunningham is reportedly ‘elated’ at the news after the area has suffered longer-term industrial decline and a shorter-term loss of 12,500 jobs in 2020. One major advantage of the Novavax vaccine is that it is a single jab – the first vaccine to require this. However, the downside is that the Novavax vaccine is less effective against the new South African variant of COVID-19.

Janssen

The pharmaceutical company owned by American Johnson & Johnson announced its 66% effective vaccine on Friday 29th January. The UK has ordered 30m doses, which are due to be delivered throughout the year. Janssen, like Novavax, is looking at the possibility of issuing the vaccine as a single jab, but has also stated the vaccine is less effective against the new South African variant.

Both vaccines still need to be reviewed by the Medicine and Healthcare Products Regulatory Agency (MHRA) before they can be used in the UK. As of Monday 1st February, almost 8m vaccinations have taken place, establishing the UK as a world leader in the inoculation race. This, however, has caused some tensions with the EU, which has been much slower to approve the use of vaccines. For example, the MHRA approved the Oxford-AstraZeneca vaccine on December 30th, and the first vaccination was delivered on January 4th. In contrast, the EU approved the same vaccine on January 30th. The EU has secured an order of 400m doses but there is contractual uncertainty over the deliverance of the manufactured vaccines to the UK or whether these should be diverted to the EU.

Talking point: Take a look at the arguments presented by EU Commission President Ursula von der Leyen – do you think AstraZeneca is contractually obliged to divert vaccines to the EU?

Asos Buys TopShop

On Monday, online retailer Asos bought HIIT brands, Miss Selfridge, Topman and Topshop from the Arcadia Group. The deal is reportedly worth £295m, comprised of £265m for the brands and £30m for the stock. Asos chief executive Nick Beighton has lauded the acquisition as an ‘exciting moment’, noting the company has already ‘been central to driving their (the acquired companies) recent growth online’.

However, the Arcadia Group’s 13,000 employees have not been saved. So far, administrators have confirmed only 300 people will transfer to Asos, meaning roughly 2,500 jobs are at risk across the sold brands.

Administrators have revealed the deal is set to complete on February 4th, at which point there will be more information.

Read more about the run-up to this purchase

GameStock Surges

Did we undertake a financial market revolution? Last week, Reddit investors took on hedge funds and short-sellers through trading. Amateur traders caused single-day gains of 135% and 301% for GameStop and AMC Entertainment to share prices respectively. This forced short-seller Citron Research to close its position at a 100% loss.

However, regulators are concerned that using a chat forum like Reddit could amount to market manipulation. Though prosecution is very unlikely, it will be interesting to see what changes can be made to prevent this from happening again.

Why might this have happened? Here are our suggestions:

  • Boredom – In the summer of 2019, individual investors accounted for only 10%; in the summer of 2020, this had doubled to 20% and it is believed this number increased over the Christmas period.
  • Access – Trading 212 in the UK and Robinhood in the US are two trading platforms with minimal fees, empowering more people to become involved in the stock market.
  • Resentment – As many experience pandemic-induced financial distress and the wealth gap widens, there may be some resentment or sense of injustice which has influenced investor’s willingness to take risks through the stock market.
  • Social media – Reddit was able to facilitate the GameStop saga. In today’s society, it appears that creating enough ‘hype’ around something can manifest it.

Regardless of investors’ motivations, this is a remarkable case, which has prompted many to suspect incoming changes to financial markets. One thing is for sure – individuals have undoubtedly rattled institutional investors.

Talking point: What other stocks were affected? Can you explain what actually happened? 

 

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