Today we bring you the top five stories of this week that you would not want to have missed.

 

OPEC v Russia

On Thursday, OPEC and other major oil producers (OPEC+) agreed to cut oil output by 10 million barrels per day. This is in response to a pandemic-driven fall in demand arising from lockdowns and travel bans in many economies. The measures although sweeping have been criticised by analysts as not being enough to combat a more than 30% fall in global oil demand.

The deal also follows a short Saudi-Arabia v Russia oil price war. The war which lasted 31 days was prompted by Russia refusing to agree to supply cuts with OPEC. In response to this refusal, Saudi Arabia flooded the oil market with cheap oil by increasing oil production and offering price discounts. The short war in addition to a fall in demand forced Big Oil companies like ExxonMobil to cut planned capital expenditure, threatening to sink US shale companies and Canada’s oil industry amongst others. For these victims, the news on Thursday comes as much-needed good news. But as the full details of the final deal are expected to be announced after Friday’s G20 meeting, many fear a diplomatic fudge.

 

SoftBank v Wework

Last Thursday, SoftBank pulled out of a $3bn tender offer for shares of WeWork. SoftBank claimed that it could not proceed due to regulatory probes and unmet requirements. The investment was supposed to be part of a rescue package SoftBank agreed with WeWork in October 2019. The package handed control of WeWork to SoftBank and provided funds to WeWork who was cash-strapped at the time, following a failed IPO and some costly investment choices.

Following SoftBank’s decision to back out of the deal, WeWork has issued a legal challenge claiming that SoftBank’s decision is a “clear breach of its contractual obligations” and a breach of “SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees”.

As the two companies lock horns, it will be interesting to see how SoftBank’s failure to provide finance and the ensuing lawsuit by WeWork will further affect WeWork’s financial position. Especially in a time when the company has been impacted severely by the coronavirus pandemic, as its tenants cease to pay rent.

 

Coronabonds  

For many weeks now, some Eurozone countries led by Italy and Spain have been pushing for common eurozone bonds to be issued to mitigate the impact of the pandemic (aka coronabonds). This idea has split Eurozone countries, with Germans firmly rejecting it and the Dutch calling the proposed collective debt issuance as unfair on the Dutch taxpayer. This split has delayed efforts to agree on a way for the Eurozone to tackle the economic effects of the pandemic.

Luckily for the markets, on Thursday the Eurogroup finance ministers agreed an emergency rescue package for eurozone countries hit hard by the pandemic. The €500bn rescue package includes a range of measures including the European Stability Mechanism, EU’s Bailout fund, promising to make €240bn available to guarantee spending by indebted countries under pressure. Although the eurozone agreement leaves undecided whether coronabonds will be used in the future, and is lower than the European Central Bank’s recommendation; it is nonetheless much-needed good news. Measures will need to be agreed on by EU authorities next week.

 

Lockdown Measures

This week news broke that Wuhan has begun to lift its official ban on travel after 76 days of lockdown. In Europe, Austria announced that it has set out plans to reopen shops as early as next week and Denmark has set out plans to reopen kindergartens, crèches and primary schools for first to fifth grades from Wednesday next week. For the UK, lockdown measures will be reviewed next week but are likely to be extended for a least three weeks. In light of this news, we may be seeing an end to lockdown measures in many countries by early or mid-May in the best-case scenario.

This news comes as good news to many businesses, especially airlines like British Airways and easyJet who grounded all their planes as a result of travel bans in many countries around the world. The news will also come as good news to many self-employed individuals and small businesses who keenly await some form of economic regularity in order to earn incomes to meet their daily needs. However, some scientists warn that there could be a resurgence if lockdown measures are relaxed and normal levels of social mixing resume.

 

Keir Starmer and Bernie Sanders

On the political side of things, in the UK last week Keir Starmer, a former director of public prosecutions, won the Labour Leadership race with 56% of the vote. He pitched himself as a leader who could heal Labour’s divisions. This week, he built his front bench team and surprisingly appointed Ed Miliband, former Labour leader, as shadow business secretary. For many, this shows Sir Starmer’s effort to rekindle a link with Labour’s prominent but disaffected MPs.

In the US, Bernie Sanders ended his presidential campaign on Wednesday. This followed significant gains by Joe Biden, former vice-president of the US. For many ardent Bernie Sanders supporters who had thought this was Bernie’s year, they will find consolation in the fact that they have won the ideological struggle, by not just running a political campaign but creating a movement that will outlive his campaign.

 

What to watch for in the coming week

The measures agreed by Eurozone’s finance ministers on Thursday are to be considered by EU leaders next week. We suggest you keep an eye out for their response. We also suggest you keep an eye out for announcements about countries lifting lockdown measures.

 

Daniel Femi-Alemede

Daniel Femi-Alemede

Hello, my name is Daniel and I am an LLB graduate from the University of Exeter. Having just completed the accelerated LPC, I am currently a trainee at a City law firm. I have an assortment of interests from politics to creative writing. A fun fact about me is that I published my first article on a statewide blog at the age of 15.

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