Fear factor driving flu crisis in business

PARIS, Apr 29: Airlines and the bacon business on one side and viral treatments and rubber gloves on the other are among sectors in the front line of economic shocks from the swine flu alert, reports AFP.
Any activity connected to international travel and tourism is seen as potentially most-exposed to a fall in traffic.
A strong warning came from Australia where tourism expert Olivia Worth said the crisis had created a “perfect storm” for Australian tourism.
But fear rather than fact is hitting some sectors while boosting others, such as drug companies, analysts say.
The main reference point for judging economic damage from global swine flu is the bird flu crisis about four years ago, which sharply reduced retail consumption in Asia where the outbreak was concentrated.
By Wednesday, flu fever on financial markets was cooling as analysts stressed that greatest factor is fear itself.
Barclays Capital in London said a key lesson of the avian flu crisis in Asia, known as SARS which began in 2003, was that “fear and panic subsided quickly once the disease was under control, and the affected economies rebounded rapidly.”
The short-lived economic impact hit mainly demand, “particularly local consumption and tourism in the afflicted economies.”
They stressed: “SARS was a crisis of fear.”
People avoided crowded places. “Restaurants, shops, cinemas and other entertainment venues were deserted. Schools were closed for weeks ... There was direct and immediate curtailment in spending and economic activity.”
But initial concern that international trade in goods, and foreign investment, would be hit faded as quickly as the outbreaks were contained.
However, Barclays analyst Julian Callow noted that the World Bank estimates that a “mild” flu epidemic defined as 1.4 million deaths would cut world output in the first year by 0.7 percent, a “moderate” pandemic of 14.2 million deaths by 2.0 percent and a “severe” pandemic of 71.1 million deaths by 4.8 percent.
In Singapore, Societe Generale bank commented that “investors have moved to trim risk averse positions,” estimating that “economic threats as a result of swine flu are, for now, adequately priced.”
In New York, Patrick O’Hare at Briefing.com said that recent reactions suggested “the market respects the swine flu scare, but that it isn’t fully intimidated by it, given past experiences.”
Business and leisure travellers are expected to reconsider trips, in some cases on official advice or because travel to Mexico for example is being suspended by some operators.
But trade in pigmeat is also in the firing line.
The United States says that nine countries have banned to some degree the importation of US pigmeat, or even other meat.
Russia has also banned imported pork from several countries in central and Latin America.
Clearly concerned about the economic damage, Washington has protested that such measures are mistaken, arguing that the human version of the virus is spread only by people not by meat. “It is perfectly safe to consume pork products from America,” US Agriculture Secretary Tom Vilsack insisted.
In Norway, a rush towards consumption of fish has driven up shares in companies which farm salmon.
Among leading international gainers from the crisis are some bonds, the dollar and yen, considered as defences in times of uncertainty, particularly the yen since Japan is seen as distant and relatively unconnected to the source in Mexico.
Some leading drug companies could benefit from sales of existing anti-flu viral treatments, and from any new vaccine which is developed.
The World Health Organization says that four “reference” laboratories are working on a vaccine, and Novartis says it is involved.
A leading gainer already is Swiss pharmaceutical group Roche, maker of Tamiflu, which was in great demand during the bird flu crisis. GlaxoSmithKline is trying to boost production of its drug, Relenza.
In Japan, shares in Chugai Pharmaceutical, which sells Tamiflu locally have risen as have shares in Green Cross in Seoul, which is developing a vaccine for avian flu.
Makers of rubber gloves and face masks can also expect a huge surge in demand, as witnessed in Hong Kong where long queues have formed outside chemists. In Malaysia, shares in a firm called Top Glove have jumped as has stock in the Latex rubber group.
Airlines are evidently the worst affected sector of business so far. The shares of several carriers have fallen sharply since the weekend.
Because of this and concerns about the wider economic effects of flu on economic activity, the price of oil has fallen.
Resigned irony seemed the best defence of Hong Kong shopper Heather Wong as she bought pork ribs while recalling previous chicken and beef scares.
“What will be left for us to eat?” she wondered. “We’d have to go vegetarian.”
But for the outspoken head of European budget airline Ryanair, Michael O’Leary, who sometimes speaks tongue-in-cheek, fear is the problem internationally.
The virus was a “tragedy” for people in the “slums” of Mexico or Asia, but for most people travelling in comfort, throat lozenges “will do the job,” he suggested.

Emirates’ offers free stay in Dubai for Bangladeshi passengers

News Report
Emirates’ Business Class passengers from Bangladesh will get the opportunity to stopover and experience Dubai for free.
Under the airline’s incredible stopover package, all first and business class bookings made for travel on Emirates Airline between May 15th and September 15th will be eligible to receive free accommodation, including breakfast, at the new and luxurious hotel The Address Downtown Burj Dubai.
The package not only includes free accommodation but also access to a number of the latest attractions in Dubai. Located within the highly acclaimed Dubai Mall, one of the largest shopping malls in the world, passengers will receive complimentary access to the incredible Dubai Mall Aquarium and Underwater Zoo as well as the Dubai Ice Rink.
Richard Vaughan, divisional senior vice president, commercial operations worldwide, Emirates said, “Many passengers transit through Dubai on route to another destination, we want our customers to have the opportunity to experience Dubai with our compliments.”
As part of the package each first and business class passenger who takes advantage of the offer will also receive a voucher booklet offering exclusive retail discounts at the Dubai Mall. With hundreds of international and local stores to choose from visitors are sure to experience shopping nirvana.
First class passengers will be entitled to two nights free accommodation and business class passengers are eligible to receive one night accommodation at The Address Downtown Burj Dubai, certainly next to Dubai Mall and the world’s tallest building, the Burj Dubai. The Address Downtown Burj Dubai features 196 lavish rooms and suites as well as an extensive range of gourmet experiences, a signature spa, a fully-equipped, state-of-the-art fitness center and chilled swimming pools.
Emirates’ onboard amenities include suites for first class passengers and flat-bed sleeper seats in business class. Premium customers enjoy complimentary chauffeur drive service to and from the airport. dedicated lounge facilities at major hub airports worldwide, meals prepared by gourmet chefs and an in-flight entertainment system featuring over 1200 channels, onboard a young and modern fleet.
Each passenger who takes up the offer will also receive a free 96 hour visa for entry into Dubai. The offer is valid for all bookings made for travel between 15th May and 15th September.

Oil heads up towards $51

LONDON, Apr 29: Oil prices climbed toward $51 per barrel on Wednesday, supported by rising stock markets and after the Energy Information Administration (EIA) reported a big draw in U.S. gasoline inventories, reports Reuters.
Investors shrugged off worse-than-expected data showing the U.S. economy contracted by 6.1 per cent in the first quarter and also a bearish industry report on Tuesday showing a large build in U.S. crude stocks.
The gradual global spread of swine flu, with the first U.S. death confirmed from the H1N1 strain, also failed to dent the oil market. By 1450 GMT (10:50 a.m. EDT), U.S. crude oil for June delivery was up $1 per barrel at $50.92, having hit a high of $51.42. Earlier the contract lost as much 80 cents.
London Brent crude was up $1 as well at $50.99 a barrel.
“We have had a high correlation between stock markets and oil over the last few weeks and when equities go up, so do oil and other commodities,” said Frank Schallenberger, head of commodities research at Landesbank in Stuttgart.
“Oil market fundamentals are very, very weak but that doesn’t seem to be making much difference to the price and sentiment is being driven by other markets.”
The US EIA reported U.S. crude oil stocks rose 4.1 million barrels to 374.7 million in the week to April 24, compared with a forecast build of 2.1 million barrels.
The EIA report said U.S. gasoline stocks were drawn down by 4.7 million barrels to 212.6 million, much more bullish than a forecast draw of just 0.2 million barrels. The gasoline draw was considered supportive by traders, as was a rise in stock markets on Wednesday.
US stocks rose more than 2 per cent on better-than-expected earnings and data that suggested business inventories will need rebuilding, even as the economy shrank more than expected in the first quarter. (.N)
European shares were up too, recovering losses made in the previous session on stronger-than-expected earnings news. (.EU)
Royal Dutch Shell (RDSa.L) gained 0.8 per cent after outperforming analysts’ forecasts, although it reported sharply lower first-quarter profits due to lower prices.
Speaking after the results, Shell Chief Financial Officer Peter Voser said oil prices were unlikely to rise significantly in the next 12-18 months because of economic weakness.
“It will take time for the economy to recover, and hence the oil and gas price will be affected by that,” Voser said.
Reuters’ poll of 11 analysts, banks and industry groups forecast world oil demand would fall this year by much more than previously expected, as growth stalls in emerging powerhouses China and India and fuel consumption declines in the developed world.
Estimates see oil growth re-emerging in 2010, but analysts remain divided about how severe this year’s demand contraction will be, as the global economic outlook remains clouded.
Reuters’ poll showed oil use declining by an average of 1.56 million barrels per day (bpd) in 2009 to 84.10 million bpd.

Fed to keep easy credit flowing for weak economy

WASHINGTON, April 29: The Federal Reserve concludes a two-day meeting yesterday widely expected to keep boosting the supply of cheap credit to support a struggling economy showing only tentative recovery signs, reports AFP.
The Federal Open Market Committee (FOMC) meeting comes amid a somewhat less bleak economic backdrop, with improvements in the troubled US housing market and consumer confidence.
But Fed members will see a stark reminder of the depth of the recession with data due early Wednesday on first-quarter US economic output — expected to show a 4.9 percent contraction at an annual pace after the fourth- quarter drop of 6.3 percent.
Analysts say this week’s meeting is likely to signal no change in policy since the FOMC March gathering, when the Fed added over one trillion dollars to its arsenal to fight the economic crisis.
The FOMC statement due Wednesday is expected to depict a weak economy that still needs extraordinary support, justifying its policy of near- zero interest rates and vast lending facilities to pump up credit availability.
Joseph Brusuelas at Moody’s Economy.com said he expects no additional stimulus efforts from the Fed but no backing away from programs already announced.
The FOMC “will restate its commitment to keep the federal funds rate between zero and 0.25 percent for an extended period,” he said.
“However, the monetary statement will account for modest improvement in economic conditions, and the meeting will focus on ending the quantitative easing program once the economy enters recovery.
Fred Dickson, market strategist at DA Davidson & Co, said the Fed may seek to “temper expectations held by a growing number of investors that the economy is about ready to bottom out and turn the corner.”
On Tuesday, a survey by the Conference Board showed US consumers turned considerably more confident in April, with more seeing a bottom taking shape in the recession-stricken economy.
The business research group’s consumer confidence index, based on a representative sample of 5,000 US households, leapt to 39.2, up from a revised 26.9 in March, a gain of nearly a point from that month’s initial estimate.
In another instance of data not as bad as feared, the Standard & Poor/Case- Shiller index showed an 18.6 percent year- over-year decline in home prices in 20 major metropolitan areas, or a 2.8 percent decline from January levels.
Despite the further drop, S&P said February was the first in 16 months the index did not see a new record drop.
The report was consistent with other data suggesting stabilization in the housing market after two horrific years.
But S&P analyst David Blitzer said, “We will certainly need a few more months of data before we can determine if home prices are finally turning around.”
At the conclusion of its March 17-18 meeting, the Fed said it would buy up to 1.2 trillion dollars in government and agency debt in an effort to bring down a variety of interest rates it does not control.
Fed chairman Ben Bernanke, who calls the effort “credit easing” instead of quantitative easing, nonetheless acknowledges the effort to effectively print vast amounts of money to help lift the economy out of its worst crisis in decades.

Deutsche Bank economist warns of more problems in sector

FRANKFURT, April 29: The chief economist of Germany’s largest bank warned yesterday of more trouble for the global banking sector, even as his own institution posted surprisingly strong first quarter results, reports AFP.
“We are in for more bad loans as a consequence of the overall economy, that is something that will plague us for quite a while,” Norbert Walter of Deutsche Bank told a Frankfurt economic outlook conference hosted by IHS Global Insight.
“New bad loans, new risks in financial institutions are beginning to show up,” he said.
Deutsche Bank had earlier posted a net profit of 1.2 billion euros (1.56 billion dollars), well above market expectations, prompting bank chairman Josef Ackermann to declare: “We are not euphoric, but we are optimistic regarding the development of our activities.”
Asked if that result, along with solid results by peers like Goldman Sachs and Credit Suisse, was a sign the international financial crisis could be at a turning point, Walter said it was probably too soon to celebrate.
“There are issues out there that have probably not yet materialized, that I would consider difficult, and I would not declare victory,” he told AFP on the conference sidelines.
Although Deutsche Bank and other global banks have taken provisions against potentially huge losses from the financial meltdown, more accounting lay ahead, the economist said.
“If you ask if there is more risk provisioning to come, I would say the probability is yes,” Walter said.
Deutsche Bank had said its first-quarter provisions against credit losses leapt to 526 million euros from 114 million in the first quarter of 2008.
Across the entire sector, “there was of course no provisioning for the overall synchronised economic decline that we now observe,” and which has seen several major economies fall into their deepest recessions since World War II.
“This is not just a subprime crisis issue, it is a prime mortgage market issue as well,” Walter had earlier told economists and analysts from several continents at the conference.
“It’s very obvious not all financial institutions around the globe that have been overlending to the real-estate sector were smart enough to get this crap out of their balance sheet.”
He pointed to a number of regional US banks and peers in Spain which “are deep in this kind of business and of course are suffering already and will suffer more.”
Another problem stemmed from the collapse of auto sales, which has forced governments to draw up rescue packages and take stakes in former auto giants like General Motors.
Walter noted that the number of pensioners who once worked for car companies was about the same as the number of current workers, which meant a heavy burden for years to come.
“Some of the loans to the car or the car supplying industry are in trouble,” he warned.
“The real economy is suffering we will have repercussions from that side that are not yet digested,” the economist said.

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