Royal Mail faces political backlash over plans to cut delivery days
Royal Mail faces the prospect of a political backlash against its plans to cut the number of days it carries out second-class deliveries.
It is a “slap in the face for families”, Liberal Democrat business spokesperson Sarah Olney has said. She said:
These plans are a slap in the face for families being asked to pay more for less. The cost of first and second-class stamps has gone up sharply in recent years.
It risks creating a cost-of-postage crisis as people feel forced to pay for first-class stamps because second-class delivery days are being slashed. People shouldn’t have to pay the price for Royal Mail’s failure after executives missed their delivery targets and paid themselves eye-watering bonuses.
It is an example of the political difficulties facing Heathrow executive Emma Gilthorpe, who was this week chosen to run Royal Mail.
Royal Mail’s parent company, International Distributions Services (IDS), proposed cutting back the Monday-to-Saturday second-class service to “every other weekday”. The proposals would also include Royal Mail cutting 1,000 jobs and saving £300m a year.
IDS said its suggestions would not require legislative change and it urged Ofcom to “act swiftly to introduce reforms by April 2025”.
The proposals would mean second-class deliveries would be slower, but there would still be the option of a more expensive next-day delivery.
You can read the full story here:
Key events
Phillip Inman
A recovery in China’s manufacturing output has failed to offset a slide in Asian stock markets that followed an earthquake in Taiwan that has killed at least nine people and forced semiconductor factories at the heart of global supply chains to shut down.
China’s factories enjoyed a period of expansion for the first time in six months in March, an official survey showed.
The official purchasing managers’ index (PMI) rose to 50.8 in March from 49.1 in February, rising above the 50-level that separates growth from contraction, and hitting the highest mark since March 2023.
Manufacturing remains a big sector in China’s economy and an important demand centre for metals such as copper and steel, as well as energy required to make goods.
The PMI followed other recent data, including a separate measure of the services industry, that suggested China‘s economy is gaining some momentum after struggling for growth in 2023.
Shares of Taiwan Semiconductor Manufacturing Co slumped 1.3% after the semiconductor giant said some facilities were evacuated after the quake. Barclays analysts said in a client note:
There have been reports of halts to semiconductor production operations, and if these become more broad-based, we expect some constraints on production, in both Taiwan and the region, that could result in upstream pricing pressures in the chip sector.
China’s blue-chip CSI300 index and Shanghai Composite index eased 0.4% and 0.2%, respectively, while Hong Kong’s Hang Seng Index fell 1.2%.
The MSCI’s Asia ex-Japan stock index shed 0.9%, compared with the 0.6% slide in the broader emerging markets stock index.
Royal Mail faces political backlash over plans to cut delivery days
Royal Mail faces the prospect of a political backlash against its plans to cut the number of days it carries out second-class deliveries.
It is a “slap in the face for families”, Liberal Democrat business spokesperson Sarah Olney has said. She said:
These plans are a slap in the face for families being asked to pay more for less. The cost of first and second-class stamps has gone up sharply in recent years.
It risks creating a cost-of-postage crisis as people feel forced to pay for first-class stamps because second-class delivery days are being slashed. People shouldn’t have to pay the price for Royal Mail’s failure after executives missed their delivery targets and paid themselves eye-watering bonuses.
It is an example of the political difficulties facing Heathrow executive Emma Gilthorpe, who was this week chosen to run Royal Mail.
Royal Mail’s parent company, International Distributions Services (IDS), proposed cutting back the Monday-to-Saturday second-class service to “every other weekday”. The proposals would also include Royal Mail cutting 1,000 jobs and saving £300m a year.
IDS said its suggestions would not require legislative change and it urged Ofcom to “act swiftly to introduce reforms by April 2025”.
The proposals would mean second-class deliveries would be slower, but there would still be the option of a more expensive next-day delivery.
You can read the full story here:
EU to enforce spending rules on Italy and other countries
Phillip Inman
European Union officials are poised to resurrect dormant rules forcing the 27 member states to stick within strict public spending rules, Italy’s economy minister said on Wednesday.
The authorities will put Italy and another 10 countries under infringement procedure for operating budgets with deficits that breach the EU’s 3% rule, Giancarlo Giorgetti said during a parliamentary hearing.
EU countries were allowed to set aside the usual cap on deficit spending during the Covid-19 pandemic. A suspension of the usual rule continued during the cost of living crisis sparked by the rise in inflation, when finance ministries reacted by dramatically increased subsidies to households and businesses.
Italy estimates a deficit-to-GDP ratio this year broadly in line with its 4.3% goal set in September, taking it far above the 3% EU ceiling. Giorgetti said:
It is granted that the European Commission will recommend the council to open an excessive deficit procedure against us as well as several other countries.
France is expected to be among the countries to come under scrutiny after it recently found that its public finances deteriorated in 2023 by more than predicted. The deficit reached 5.5% compared with 4.8% in 2022, the statistics authority said last month.
HSBC chairman Mark Tucker has told investors in Hong Kong that a sale of its Asian business will not happen – after the UK-headquartered bank defeated a proposal last year by Chinese shareholder Ping An.
Reuters reports that Tucker said at a meeting, in response to a shareholder’s question:
There is no appetite amongst our shareholder base, as demonstrated by last year’s AGM results, to vote for a spin-off. That will not happen.
HSBC defeated a shareholder resolution brought by Ping An in May 2023. Some investors had argued that HSBC’s Asian business would operate more profitably away from the regulatory and political scrutiny put on a British business. However, many of HSBC’s UK investors are reluctant to lose the bank’s cash cow.
The question on economists’ lips after the surprise easing of eurozone inflation is: will the European Central Bank (ECB) cut interest rates as early as this month?
The ECB’s rate-setting governing council, led by president Christine Lagarde, meets next week. Economists expect the council to cut rates in June, but surprising data and some doveish comments from some members of the council appear to have put an April cut into play.
“Today’s reading will be a relief to ECB doves as it provides some comfort that domestic inflation is easing,” said Bert Colijn, senior economist for the eurozone at ING, a bank. He said:
While at first sight this looks like it opens up a possible rate cut in April, the ECB is unlikely to act this month. More data on wage growth will come in May, and the ECB needs to be certain of its path. In President Lagarde’s own words: “we will know a little more in April, but we will know a lot more in June”.
Richard Flax, chief investment officer at Moneyfarm, an asset manager, said the data “aligns with expectations of a cooling economy and adds weight to the argument for monetary stimulus”. He said:
Christine Lagarde’s previous indication that the ECB may not commit outright to a path of rate cuts suggests a cautious approach, but the consensus among economists leans towards a potential cut as early as June, pending further data on wage growth trends.
The challenge here for the ECB is that reaching the last mile target inflation rate of 2% may prove more arduous than anticipated, with incremental decreases seen as most likely.
Eurozone unemployment stayed flat in February at 6.5%.
Usually a historically low unemployment rate would give central bankers pause before they cut interest rates.
However, that does not appear to be the case this time, according to Melanie Debono, senior Europe economist at Pantheon Macroeconomics, a consultancy. She said:
Will the labour market tighten further now that GDP growth looks to be rebounding? We doubt it and, in fact, suspect the unemployment rate will edge up over the coming months.
A still-low unemployment rate doesn’t necessarily mean wage growth will remain at today’s highs, so it need not worry the ECB nor prevent it from starting its easing cycle. We think wage growth will come down, in line with the fall in inflation in recent months as workers’ negotiating power diminishes. A recovery in productivity would support wage growth even as inflation eases. We think productivity growth is now improving, but slowly does it.
*This post has been corrected: unemployment did not rise slightly in February as previously stated.
Royal Mail owner wants to cut delivery days and 1,000 jobs
Alex Lawson
The owner of Royal Mail has asked the industry regulator to be allowed to reduce second-class letters to just two or three days a week, cutting nearly 1,000 jobs and saving £300m a year in the process.
International Distributions Services (IDS) has told Ofcom it hopes to pare back the six-day, Monday to Saturday second class service to “every other weekday”.
However, IDS has committed to continue to deliver first class letters from Monday to Saturday, in a move which will relieve publishers and small businesses who have voiced concerns over potential “panicked” cuts.
Under the proposals, a postal worker may deliver on a single route on Monday, Wednesday and Friday, for example, and on another route Tuesday and Thursday of the same week. The speed of the second-class delivery would then depend on when the letter was posted.
First-class letters would then likely be delivered using the network of Royal Mail vans used for parcels.
Eurozone inflation drops unexpectedly to 2.4% in March
Eurozone inflation fell unexpectedly in March, adding to the case for an interest rate cut by the European Central Bank.
Consumer prices rose by 2.4% in the year to March, down from the 2.6% rate in February, according to statistics office Eurostat. That was below the 2.6% expected by economists.
It was a drop in energy prices that pulled down overall inflation. Energy prices soared over the last two years after Russia’s full-scale invasion of Ukraine, but have steadied – albeit at much higher prices – since then.
The drop in inflation will increase expectations of an interest rate cut by the European Central Bank, which is widely expected to loosen monetary policy at its meeting in June.
Virgin Atlantic loses £139m but expects 2024 profit
Virgin Atlantic has said that expects to make a profit this year, after narrowing its losses during 2023 in the long aftermath of the coronavirus pandemic.
The airline, which is part-owned by Richard Branson’s Virgin Group, said that losses before tax and exceptional items fell to £139m, down from £206m.
While some airlines – such as Ryanair – have raced past pre-pandemic passenger numbers, long-haul aviation has been slower to recover. Virgin Atlantic is focused on long-haul transatlantic routes such as between London and New York, and it also flies to a few destinations in Asia and Africa.
The company also said that it had made record total revenue of £3.1bn, up £265m versus 2022. It said that result came “despite corporate travel being slower to return to pre-pandemic levels”.
Shai Weiss, Virgin Atlantic’s chief executive, said:
In 2023, we capitalised on continued strong demand for leisure air travel and holidays, which shows that desire for experiences and travel remains, resulting in record revenues. A loss is never satisfactory; however, our performance and results illustrate that we have made really good progress in 2023, the plan is working, and Virgin Atlantic is on course to return to profitability in 2024.
Elon Musk is not a Disney shareholder – so it is unclear why he is getting involved. However, he has never been one to turn down the chance of a scrap.
The immediate prompt for his posts just now was another billionaire activist investor, Bill Ackman. Ackman, who is not directly involved in the Disney board battle, published an article-length post on Musk’s social network, X, calling for the US regulator to investigate the Disney board battle.
Ackman said that the Securities and Exchange Commission should look at who has leaked results of the Disney vote – which is not finalised. He accused the company and/or its advisers of being behind the leak, although he did not have any direct evidence other than the fact that “Only the company and its advisers have access to how shareholders have voted before the day of the annual meeting.”
Disney has been approached for comment.
There have been a few recent articles in the press about @Disney ‘winning’ its proxy contest with Nelson Peltz based on early election returns that have been leaked to the media. We don’t have an investment in Disney, but I thought it useful to point out the inappropriateness of…
— Bill Ackman (@BillAckman) April 2, 2024
Ackman, the veteran of many battles with company boards, said that he believed the company was trying to sway institutional investors who might be wavering in the close vote. He wrote:
Here, the company and/or its advisers have leaked the early results in order to tip more institutions and other shareholders to vote for the incumbent board, unfairly tipping the scale in the incumbent board’s favor.
Elon Musk says Nelson Peltz would improve Disney
Tesla boss Elon Musk has said that Nelson Peltz would “significantly improve Disney’s share price” if he joined the board.
Musk, the world’s third richest man according to the Bloomberg Billionaires Index, also said that he would “definitely” buy Disney shares if Peltz were elected.
Nelson Peltz should definitely be on the Disney board!
He would help reform the company, improve the quality of product and generally serve in the best interests of shareholders, as he has done at many other companies.
This would significantly improve Disney’s share price. https://t.co/JPa6dP7kbQ
— Elon Musk (@elonmusk) April 3, 2024
While I don’t own any Disney shares today, I would definitely buy their shares if Nelson were elected to the board.
His track record is excellent.
— Elon Musk (@elonmusk) April 3, 2024
Ryanair has said that it cancelled almost 950 flights during March because of the conflict in Israel and Gaza.
The Irish airline said that it carried 1m more passengers during March 2024 compared with March 2023. That represented an 8% increase to 13.6m. The airline’s load factor was unchanged.
Ryanair is the world’s second most valuable by market capitalisation, behind only the US’s Delta. It flew 77,000 flights in March, and has flown 183.7m passengers during the last 12 months.
London’s FTSE 100 and Milan’s FTSE MIB are the biggest fallers of the main European stock market indices this morning. Both have lost 0.3%.
There are no major individual movers on the FTSE 100, however: the biggest faller is BT Group, down 1.7%.
Elsewhere in Europe it is a more mildly positive story. Here are the opening snaps via Reuters from across the rest of Europe:
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EUROPE’S STOXX 600 UP 0.1%
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FRANCE’S CAC 40 UP 0.2%, SPAIN’S IBEX UP 0.1%
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EURO STOXX INDEX UP 0.2%; EURO ZONE BLUE CHIPS UP 0.3%
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GERMANY’S DAX UP 0.2%
Chipmakers evacuate Taiwan factories after earthquake
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
The biggest earthquake in 25 years has hit Taiwan, killing at least seven people. On financial markets investors are bracing for disruption to the island’s crucial technology companies.
Taiwan plays a central role in the global economy because of its status as a manufacturing hub for computer chips, as well as its companies in the broader technology supply chain.
The earthquake’s epicentre was on the east coast of the island, while most of its tech manufacturing is based in the west. Nevertheless, the quake affected production at chip fabs, which rely on very sensitive machinery.
The share price of Taiwan Semiconductor Manufacturing Co, which makes most of the world’s cutting-edge chips on behalf of others, dropped by 1.3% on Wednesday. The company said in a statement it was still trying to work out the impact of the earthquake on its operations:
TSMC’s safety systems are operating normally. Preventive measures were initiated according to procedure and some fabs were evacuated. All personnel are safe, and those evacuated are beginning to return to their workplaces.
The company is currently confirming the details of the impact. Initial inspections show that construction sites are normal.
However, the company has decided to suspend work at construction sites for today, and work will resume following further inspections.
Shares in major Apple supplier Foxconn dropped by 1.4%, while TV panel manufacturer Au Optronics fell by 1.9%.
Disney reportedly fends off Nelson Peltz
Disney has reportedly managed to fend off a bid for board seats from activist investment billionaire Nelson Peltz. That would be a victory for prominent Disney chief executive Bob Iger.
Peltz’s hedge fund, Trian Fund Management, has failed to win enough shareholder backers to install Peltz and former Disney chief financial officer Jay Rasulo on the entertainment company’s board, Reuters reported, citing anonymous sources. Reuters said:
Enough votes had been cast as of Tuesday evening to put Disney’s board directors safely ahead of Trian’s two challengers.
Investors could still change their votes. However, if the result is confirmed at Wednesday’s annual meeting as expected it would represent a significant relief for Disney’s management.
Peltz has campaigned for board seats for months, arguing that the House of Mouse was too late to develop a coherent streaming strategy and that it overpaid on its $71bn acquisition of Fox.
However, Iger successfully won around well-known and powerful investors including Steve Jobs’s widow Laurene Powell Jobs, JP Morgan boss Jamie Dimon and Star Wars creator George Lucas
The agenda
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10am BST: Euro area inflation rate flash reading (March; previous: 2.6% year-on-year; consensus: 2.6%)
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10am BST: Euro area unemployment rate (February; prev.: 6.4%; cons.: 6.4%)
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1:15pm BST: US ADP employment change (March; prev.: 140,000 jobs; cons.: 148,000)
