The US stock market on Friday closed the week on the red zone as the coronavirus outbreak in the country continued to worsen. At least eleven states have paused their reopening plans over fears that new infections might be increasing rapidly.
The Dow Jones fell by more than 700 points with Goldman Sachs leading the losses falling by 8%. The S&P 500 fell 2.40% while the Nasdaq 100 declined 2.50% as Facebook emerged as the worst performer by over 8%.
News Highlights of the Week
Fed & the economy
The US Federal Reserve on Thursday said it restricted dividends banks can pay shareholders and required them to suspend share repurchases in Q3 saying in house analysis showed that some banks could approach minimum capital levels. It added that the lenders will only be allowed to pay dividends in line with a formula based on their most recent income and that they need to re-evaluate their long-term capital plans. The central bank also added that banks will have to resubmit their capital plans this year.
This comes even as the country’s transport department announced that 41% of domestic flights were cancelled in April due to the pandemic. The largest airlines have significantly reduced the number of scheduled flights and almost half were cancelled. Delta Air Lines said it will layoff more than 2,500 pilots citing reduced demand caused by the pandemic.
Brands Suspend Advertising on Social Media Platforms
Shares of Facebook and Twitter fell after several brands including Uniliver, Verizon and Cocacola have suspended paid advertising on all social media platforms citing unhappiness with the way social networks have been reacting to hate speech and political content.
“There is no place for racism in the world and there is no place for racism on social media,” Cocacola CEO and chairman James Quincey noted. “We will take this time to reassess our advertising policies to determine whether revisions are needed. We also expect greater accountability and transparency from our social media partners.”
Amazon Acquires self-driving startup Zoox for over $1B
Amazon has announced the acquisition of self-driving startup Zoox Inc. in a deal worth over $1.2 billion.
“Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience. Like Amazon, Zoox is passionate about innovation and about its customers, and we’re excited to help the talented Zoox team to bring their vision to reality in the years ahead,” Amazon’s CEO of Worldwide Consumer Jeff Wilke noted in a statement.
Meanwhile, Tesla CEO Elon Musk called Amazon CEO Jeff Bezos a “copycat” on Friday after the tech giant acquired self-driving start-up Zoox.
According to Complex Magazine, Nike has announced layoffs citing the closure of stores across the world due to COVID-19. The firm’s revenues fell by 38% to $6.3 billion while its share price fell by 5.18%.
“These decisions are exceptionally difficult because they impact friends and colleagues at Nike,” CEO Donahoe said in an email. “You have my personal commitment that we will put people at the centre throughout this entire process. We will support everyone impacted by this transition.”
Shares of German Fintech company Wirecard have fallen by more than 94% over the last week following the news of an accounting scandal over a missing $2.1 billion. During the week, the firm announced it will file an application for insolvency even as its auditors Ernst & Young accused the fintech firm of committing an “elaborate fraud”.
Wirecard’s CEO Markus Braun resigned amid the scandal and was later arrested and released on $5.6 million bail.
According to Reuters, SoftBank Group is planning to sue accounting firm Ernst & Young over its role in the scandal. In April 2019, SoftBank made a €900 million investment in Wirecard via convertible bonds to acquire a 5.6% stake.
Microsoft announced on Friday that it will close all of its 83 physical stores and switch to online only.
The company’s retail team members will continue to serve customers from Microsoft corporate facilities and remotely providing sales, training, and support. Microsoft will continue to invest in its digital storefronts on Microsoft.com, and stores in Xbox and Windows, reaching more than 1.2 billion people every month in 190 markets, it said in a statement.
China to track transactions to stop capital outflow
China will start tracking big cash transactions to stop capital outflows and to preserve the value of the country’s holdings in dollars.
According to Nikkei Asian Review, banks in Hebei Province will have to record serial numbers for any personal cash transactions of 100,000 yuan ($14,100) or more and report them to the People’s Bank of China starting July 2020.
China also aims to preserve its limited supply of dollars, as its foreign reserves of around $3 trillion are expected to decrease in their value as a result of the country’s dispute over trade with the United States.