Top financial market stories of the week
By: Jaanki Thakrar
Tags: Stock Market, Brexit, Economics, Economy, Finance

Monday 7th December 2020-Friday 11th December 2020

UK

UK backs down on internal market bill in event of a deal with EU — Monday

Boris Johnson has offered to drop contentious clauses in the UK internal market bill if a trade deal is agreed. The UK government has formally offered to withdraw or deactivate parts of the bill that would allow it to override aspects of the Brexit withdrawal agreement if it reaches an accord with the EU this week.

In a statement from the prime minister’s office, it said: “Discussions continue to progress and final decisions are expected in the coming days. If the solutions being considered in those discussions are agreed, the UK government would be prepared to remove clause 44 of the UK Internal Market Bill, concerning export declarations. The UK government would also be prepared to deactivate clauses 45 and 47, concerning state aid, such that they could be used only when consistent with the United Kingdom’s rights and obligations under international law.”

The internal market bill has faced heavy criticism for breaking international law. It enables ministers to ignore certain requirements concerning Northern Ireland as set out in a Brexit deal signed last year. Under the terms, companies moving goods from Northern Ireland to Great Britain would have to fill out export declaration forms, but ministers could overrule this option. The bill, which was initially passed by MPs, would also allow ministers to reinterpret rules on the financial support the government gives to businesses in Northern Ireland.

2. Pound slides as hopes of a Brexit deal fade — Thursday

The pound extended its losses against the dollar and the euro on Thursday, as investors became more cautious about the risk of Britain and the EU failing to agree on a Brexit deal, with just three weeks until the Dec. 31 deadline. The pound dropped not long after 22:00 GMT on Wednesday, when dinner between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen ended with both sides still “far apart”. The pound extended its fall in early London trading, down 0.6% against the dollar at $1.3318. Against the euro it was down around 0.7% at 90.755 pence.

3. Mastercard faces £14 billion lawsuit — Friday

The UK Supreme Court on Friday allowed a £14 billion ($18.5 billion) class action to proceed against Mastercard for allegedly overcharging more than 46 million people in Britain over a 15-year period in a landmark judgment. The complex case, brought after Mastercard lost an appeal against a 2007 European Commission ruling that its fees were anti-competitive, could entitle adults in Britain to £300 each if it is successful. Former financial ombudsman Walter Merricks, who brought forward this lawsuit, alleges the card giant’s breaches of competition law, found by the European Commission in 2007, have led to people paying higher prices on goods from businesses that accepted Mastercard. The claim was revived by a Court of Appeal judgment in April last year, in which senior judges found that the Competition Appeal Tribunal (CAT) had applied the wrong legal test in deciding whether to give the claim the go-ahead.

Mr Merricks’ claim is one of the first mass consumer claims brought in the UK after the introduction of a class action regime in 2015. The proposed action is an “opt-out” claim, which means potential claimants — anyone who was over the age of 16 and resident in the UK for at least three months between 1992 and 2008, and who made a purchase from a business that accepted Mastercard — are part of the action unless they specifically choose not to be.

US

1. US sues Facebook for continuous abuse of monopoly power — Wednesday

Dozens of states and the federal government sued Facebook on Wednesday in twin antitrust lawsuits, alleging that the social media giant has abused its dominance in the digital marketplace and engaged in anticompetitive behaviour. The Federal Trade Commission, in particular, is seeking a permanent injunction in federal court that could, among other things, require the company to divest assets, including Instagram and WhatsApp. Much of the scrutiny of Facebook concerns the companies it has purchased to build up a massive audience that now totals more than 3 billion users across its portfolio of apps, according to its financial statements.

The suits come roughly 14 months after New York Attorney General Letitia James announced that her office was leading a group of attorneys general in investigating Facebook for potential anticompetitive practices. The FTC, meanwhile, has been conducting its own antitrust investigation of Facebook since June 2019. “For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition,” James said at a press conference Wednesday. “By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived to be potential threats.”

2. AirBnb hold its IPO — Thursday

Airbnb’s shares more than doubled after its Wall Street debut on Thursday that valued the travel website at more than $100 billion. The spike makes the company the biggest ever to double its value on its first day of trading and will lead to new fears that an overheating market is pushing tech valuations too high.

Founded in 2008, Airbnb now has more than 7 million short-term listings worldwide and at $100 billion would be valued at twice the value of Marriott, the largest hotel operator. The share sale was priced at $68 a share but the company started trading at over $150 a share amid fierce bidding and closed the day at $144.70. Brian Chesky, Airbnb’s chief executive officer, holds a stake that is now worth more than $11 billion. He and his co-founders, Joe Gebbia and Nathan Blecharczyk, will retain 42.2% of the voting rights in the public company. The founders sold 1.5 million shares in the offering, amounting to about $106 million at the IPO price, while the company raised $3.4 billion in new money.

Global

1. Hong Kong sees its biggest IPOof 2020 — Tuesday

Shares of JD Health, the health care unit of Chinese e-commerce giant JD.com, surged in the company’s debut on the Hong Kong stock exchange on Tuesday to close at HK$114 or $14.71, roughly 60% above list price. Before trading began, JD Health had raised $3.5 billion at a valuation of $28.5 billion, making it Hong Kong’s largest initial public offering of the year.

JD.com first entered the health care sector in 2013, selling pharmaceutical products online. In 2016, JD.com created a stand-alone JD Pharmacy platform. A year later, the firm got into the wholesale medicine procurement business for pharmacies and hospitals and launched online health care services. In 2019, JD.com launched the JD Health subsidiary. In 2020, the pandemic forced millions of customers online, accelerating the digitization of health care services and making JD Health even more appealing to investors. JD Health says its user base grew to 72 million people this year, up 30% from 2019.

2. EU countries approve €1.8 trillion budget — Thursday

EU leaders accepted the compromise reached between Germany and Hungary and Poland to unblock the EU budget package totalling €1.8 trillion, after the European Commission clarified that the rule of law mechanism will be valid from 1 January. Five months after it was agreed, and following three weeks of intense blockade by Hungary and Poland, EU leaders gave their final blessing to the EU’s unprecedented budget deal to overcome the worst recession in a century. EU leaders accepted the compromise reached between Germany and Hungary and Poland to withdraw their vetoes on the budget package, due to their objections to the new Rule of Law mechanism attached to the EU funds. The declaration left intact the essence and the scope of the mechanism, which will allow for the suspension of EU funds to countries in cases of corruption or conflict of interest affecting EU cash, or if there’s a risk of non-independent judicial supervision.

EU lawmakers still need to overcome several hurdles before the recovery funds start to flow in the second half of 2021, as EU officials hope and expect. Both sides are still negotiating the details of the €672 billion Recovery and Resilience Facility. They will meet again next week to finalise an agreement, after they had to cancel their talks this week due to the efforts dedicated to overcome the vetoes and Brexit.

Where did markets finish this week?