Covid-19 Business Update

September 3, 2020: Low interest rates boost trend toward fixed-rate mortgages, and other European and worldwide news

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Covid-19 Business Update
3rd September 2020

Low interest rates boost trend toward fixed-rate mortgages

Homeowners are turning away from variable interest rate mortgages in favour of fixed rates in order to benefit from the current especially low rates. Additionally, current economic uncertainty stemming from the Covid-19 pandemic is making fixed-rate deals even more attractive, according to Marc Geib, head of corporate banking at ING Luxembourg. However, Yves Biewer, a member of the executive committee at Banque Raiffeisen, says variable-rate mortgages are generally less expensive in the long run.

Best source: Wort (in French)

Voucher scheme has boosted hotel and campsite occupancy: Lex Delles

Around 62% of hotels and 86% of campsites in Luxembourg welcomed more Luxembourg residents over the summer than in previous years, according to a survey by the Tourism Ministry. One-third of hotels and 57% of campsites report a substantial increase in domestic business, which tourism minister Lex Delles attributes to the €50 Luxembourg accommodation vouchers offered by the tourism authority to all residents and cross-border commuters. The scheme, which will run until the end of the year, was introduced to offset an anticipated fall in foreign holidaymakers with local tourism businesses. So far 34,000 vouchers with a value of €17m have been spent with 234 businesses.

Best source: Delano
See also: Luxembourg Times (subscription required)

ESMA concerned about decoupling financial markets from economic activity

The European Securities and Market Authority has highlighted the risk of a decoupling of financial market performance and underlying economic activity, raising the question of the sustainability of the current market boom. In its latest Trends, Risks and Vulnerabilities Report, ESMA says the market environment remains fragile, and it sees a prolonged period of risk to institutional and retail investors of further market corrections.

Best source: ESMA

Deutsche CEO Christian Sewing warns of risk of zombie companies

Deutsche Bank CEO Christian Sewing fears the Covid-19 pandemic will put a strain on the global economy for a long time and will have serious consequences for banks. He also warns that government aid to businesses could delay adjustment to the long-term consequences of the slump and sees a risk of German zombie companies that are not viable in the long term but that will be artificially kept alive.

Best source: CNBC
See also: Handelsblatt (subscription required, in German)

ECB extends credit lines to Croatia and Romania central banks

The European Central Bank has agreed a euro liquidity line of up to €2bn up to the end of June 2021 with Croatia’s central bank Hrvatska Noarodna Banka and a €4.5bn line for Romania’s Banca Naţională a României. The maximum maturity for each drawing is six months.

Best source: European Central Bank

London High Court judge approves Virgin Atlantic rescue deal

Virgin Atlantic’s £1.2bn rescue deal is set for finalisation this week after a High Court judge in London approved the airline’s restructuring plan. Virgin Atlantic said it would run out of cash by the end of September if the restructuring did not go ahead, but it was approved by judge Richard Snowden after creditors voted to back it. A procedural court hearing is scheduled to take place in the US this week so the deal can be recognised there, but Snowden says the court order is not conditional on that process.

Best source: Reuters
See also: City A.M.

Australian economy falls into recession after shrinking by 7% in second quarter

Australia’s economy is officially in recession after shrinking by 7% in the three months to the end of June, following a 0.3% fall in the first quarter, the country’s worst slump on record, according to the Australian Bureau of Statistics. Finance minister Josh Frydenberg says the figures confirm the devastating impact of the Covid-19 pandemic, with more than a million people having lost their jobs since the government began shutting down extensive sectors of the economy in March.

Best source: Reuters
See also: BBC News

Tesla prepares for $5bn capital-raising following surge in market valuation

Palo Alto-based electric vehicle manufacturer Tesla is preparing to raise $5bn to take advantage of the exceptional surge in its share price this year. Tesla, which is popular with retail investors who make up around 20% of its shareholders, announced a five-for-one stock split on September 1 after its market valuation had climbed by more than 500% in eight months.

Best source: Les Echos (subscription required, in French)
See also: Reuters

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