Price gouging a global problem

According to a recent Fin24 article, 11 firms are being investigated for selling products such as face masks and hand sanitisers at inflated prices amid the Covid-19 crisis.

Last week, President Cyril Ramaphosa announced strict regulations to prevent businesses from hiking prices excessively for certain products – such as basic foods, personal care and hygiene products, as well as key medical supplies like surgical masks and gloves.

The firms will be investigated and, if necessary, prosecuted.

Penalties for flouting the regulations include:

  • R1 million in fine;
  • A fine of up to 10% of a company’s turnover; or
  • One year in jail.

An international problem

The problem of price gouging amid the Covid-19 crisis isn’t just a local one. The LA Times has reported that  Amazon has suspended more than 3 900 selling accounts in the US for violating its fair pricing policies.

This amounts to well over half a million offers, according to the online marketplace.
Amazon has subsequently deployed a team to identify and investigate “unfairly priced” products that are in high demand, such as protective masks and hand sanitiser.

Florida’s Attorney General Ashley Moody has issued more than 40 subpoenas because of alleged price gouging on “essential commodities” through accounts on Amazon.

By Fergal O’Brien for Bloomberg

The global economy is taking a hammering the likes of which has not been seen for years. With factories, stores and restaurants shut, aircraft grounded and travel restricted, the monthly Purchasing Managers Indexes from IHS Markit laid out the scale of the challenge. The US PMI, due later on Tuesday, is forecast to show sharp contractions.

The euro-area measure for manufacturing and services dropped to the lowest since the series began in 1998, as did the gauges for the UK and Australia. Japan’s composite index fell to the weakest since 2011, while measures for Germany and France also plunged.

“The near-term economic outlook is terrible,” said Stephen King, senior economic adviser at HSBC Holdings. “There should be no surprise about these numbers given what is going on and that they confirm what we knew from China earlier.”

The PMI may not even capture the full extent of the downturn, because of the way the hit to supply chains is distorting the results. IMF Managing Director Kristalina Georgieva warned on Monday that the global economy is facing a slump “at least as bad as during the global financial crisis or worse”.

In the UK, separate figures added to the bleak picture. The Confederation of British Industry said manufacturers’ orders books fell sharply, and companies anticipate a drop in output in the coming months.

Investor concern has sparked a panicked selloff in equity markets. The Stoxx Europe 600 Index has fallen more than 30% in the past month, effectively wiping out almost seven years of gains. The S&P 500 is at the lowest since 2016.

The airline industry is among the worst hit, and companies including Germany’s Deutsche Lufthansa have been forced to ground thousands of planes. Countless jobs are at risk because of closures, while manufacturing has also been disrupted by national lockdowns.

Warnings about the depth of the slump having been coming almost daily.

At the weekend, Morgan Stanley said that US gross domestic product could fall at an annual rate of 30% in the second quarter, driving up unemployment to average 12.8%. Federal Reserve policy maker James Bullard offered an even worse prediction that the jobless rate could rise to 30%.

Bloomberg Economics says the global economy will shrink almost 2% year-on-year in the first half, with the euro-area suffering the worst back to back quarterly contractions in its history. While a pickup is expected later this year, “a lot needs to go right” for that to happen, according to Tom Orlik, BE chief economist.

Just hours before the euro-area PMI, Goldman Sachs Group said the region’s economy could shrink more than 11% quarter-on-quarter in the three months through June.

Central banks are continuing their firefight, with almost 40 interest-rate cuts last week alone.

The Fed unexpectedly announced more huge measures on Monday, saying it will buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs at rock-bottom levels. Both the Bank of England and the European Central Bank have also announced huge expansions of their asset-purchase programmes.

By Phillip Inman for The Guardian

The coronavirus could cost the global economy more than $1tn in lost output if it turns into a pandemic, according to a leading economic forecaster.

Oxford Economics warned that the spread of the virus to regions outside Asia would knock 1.3% off global growth this year, the equivalent of $1.1tn in lost income.

The consultancy said its model of the global economy showed the virus was already having a “chilling effect” as factory closures in China spilled over to neighbouring countries and major companies struggled to source components and finished goods from the far east.

Apple told investors earlier this week that it would fail to meet its quarterly revenue target because of the “temporarily constrained” supply of iPhones and a dramatic drop in Chinese spending during the virus crisis.

Carmaker Jaguar Land Rover, adding its voice to a chorus of companies complaining about supply problems, said it could run out of car parts at its British factories by the end of next week if the coronavirus continued to prevent parts arriving from China.

Oxford Economics said it expected China’s GDP growth to fall from 6% last year to 5.4% in 2020 following the spread of the virus so far. But if it spreads more widely in Asia, world GDP would fall by $400bn in 2020, or 0.5%.

If the virus spreads beyond Asia and becomes a global pandemic, world GDP would drop $1.1tn, or 1.3% compared to the current projection. A $1.1tn decline would be the same as losing the entire annual output of Indonesia, the world’s 16th largest economy.

“Our scenarios see world GDP hit as a result of declines in discretionary consumption and travel and tourism, with some knock-on financial market effects and weaker investment,” it said.

Rival consultancy Capital Economics said the situation in China was still developing and it remained unclear how long before the quarantine rules across much of China’s central belt would lead to mass job layoffs and wage cuts becoming more widespread.

It said 85% of larger stock market-listed firms had enough funds to meet their liabilities and wage bills formore than six months without any further revenue.

But thousands of small and medium-sized businesses, which are responsible for half of urban jobs, “may not heed government orders not to shed jobs”.

A survey of 1,000 SMEs conducted by two Chinese universities found that unless conditions improved, one-third of the firms would run out of cash within a month, the consultancy said.

Another survey of 700 companies found that 40% of private firms would run out of cash within three months.

The firm’s Asia analyst, Julian Evans Pritchard, said: “Our best guess is that there is still a window of another week or so during which, if economic activity rebounds, the bulk of employees including at vulnerable SMEs would probably keep their jobs.

“And with large-scale layoffs avoided, consumer spending would bounce back quickly due to pent-up demand, which in turn would help the self-employed and family-run businesses to recoup much of their recent loss of income.

“But with each day that the disruption drags on, the risk of a protracted slump in output rises. If activity is not clearly rebounding by the end of next week, we will revisit our annual growth forecasts.

Oxford Economics said it still expected the impact of the virus to be limited to China and have a significant, but short-term impact, bringing world GDP growth just 0.2% lower than January at 2.3%.

But a pandemic would cause a deeper and more profound shock over the next six months, possibly equal to a $1.1tn loss, followed by a recovery that would make up some of the ground lost earlier in the year.

By Michael Grothaus for Fast Company

If you’ve stepped into a mall recently you might find it not too surprising that malls are dying. There’s plenty of blame to go around for that too: Amazon, the changing shopping habits of internet-savvy consumers, and major brick-and-mortar retailers offering free shipping—just to name a few.

As a result, malls are becoming ghost towns, looking more fit for the setting of a zombie apocalypse movie than a setting where people congregate to shop. Matter of fact, as Business Insider points out, 25% of malls will shut their doors by 2022, and more than 9,300 retail stores are expected to have closed in 2019–many of them in malls.

That’s why it’s no surprise that mall owners are taking rather drastic steps to keep retailers from leaving. Matter of fact, popular fashion chain – and mall stalwart – Forever 21 just reached an agreement to sell its beleaguered business for $81-million. The buyers? A group that includes Simon Property Group, Brookfield Property Partners and Authentic Brands, reports CNBC. Simon Property Group and Brookfield Property Partners are large owners of malls.

In other words, the two groups are buying their former tenant, in part at least, to keep that tenant in their malls. The groups’ fear is that if a large, popular chain like Forever 21 leaves those malls, overall foot traffic to those malls will drop, resulting in lower sales for all stores—and potentially more of those stores shuttering.

Simply put: Simon Property Group and Brookfield Property Partners buying Forever 21 is an attempt to stop more of their malls from becoming ghost towns. Simon Property Group’s malls have more than 100 Forever 21 stores in them alone.

This isn’t the first time Simon and Brookfield have bought a struggling retailer to keep their malls from becoming vacant, CNBC notes. In 2016 Simon and General Growth Properties (now owned by Brookfield) rescued Aeropostale from bankruptcy, keeping the retailer in its malls. As mall traffic continues to decline, it’s possible more mall owners could take similar steps in the coming years to ensure the death of malls isn’t a foregone conclusion—or at least that their demise is slowed.

The revival of personalised stationery

By Anne Quito for Quartzy

It can be argued that dread of receiving another unsolicited e-mail conjures the opposite feeling from the delight of getting a handwritten letter. Escaping our cluttered inboxes is one factor fuelling a renewed interest in paper goods and the range of analogue props used in handwritten correspondence. Analysts report that the global market for stationery is growing and expected to reach the $128-billion mark by 2025.

Apart from traditional stationers like Crane & Co and Smythson, a slew of e-commerce startups like Sugar Paper, Minted, Moglea, and StudioSarah are helping spread the love for paper beyond wedding planning and socialite circles. The choices for personal stationery are so plentiful these days that it can be intimidating. Letterpress or offset? Baskerville or Copperplate? To emboss or deboss, that is the question.

A Canadian startup called Maurèle wants to simplify the task of specifying tasteful personalized paper goods. Founded by husband and wife duo Nick D’Urbano and architect Cece de la Montagne, its e-commerce platform offers obsessively designed templates inspired by the beautiful letterheads of historical figures like Albert Einstein, Salvador Dali, and Frank Lloyd Wright (some of which are documented in the addictive site Letterheady).

De la Montagne, whose family is in the printing business, says they labored over Maurèle’s six minimalist templates to appeal to discerning customers, choosing just the right paper stocks, sourcing eco-friendly vegetable inks, and working with independent type foundries to select the fonts. “From a business standpoint, we feel that the design-conscious customer just wasn’t being spoken to,” adds D’Urbano. They believe that type nerds in particular will appreciate the proper kerning and letter spacing for each of the 13 font options on the site. Custom notecards start at $28 for eight and $34 for 16 sheets of letter paper.

Beyond stationery fanatics, De la Montagne adds that Maurèle’s quiet luxury aesthetic might appeal to acolytes of the thriving mindfulness movement seeking to disconnect from the chaos of technology. Writing by hand, she explains, is fundamentally seizing a moment to gather your thoughts without distraction. Maurèle reflects a similar sensibility to her line of minimalist work bags for creative types, produced under the label Atelier YUL.

Stationery is just the start, D’Urbano explains. A week into their launch, they’re already planning a line of pens, leather goods, and reprints of books in the public domain, leveraging their connection with type and graphic designers. Their ultimate dream is to erect physical stores where one can sit down to write or read in an unhurried manner, says De la Montagne, who worked at a boutique architecture firm in New York until last year. “What would a library-cafe look like in the 21st century?” she muses.

If it’s an alternative to co-working coffee shops populated by caffeinated zombies on their laptops, we’re all for it.

Image credit: Cerulean Press

Forever 21 has filed for bankruptcy

By Cortney Moore for FOX Business

Forever 21 is about to start aging.

The iconic youth-focused fashion retailer announced to its customers on Monday that it indeed is filing for bankruptcy despite its attempts to quash rumors about the business development in a newsletter 10 days prior. Under the U.S. Bankruptcy Code’s chapter 11, Forever 21 will remain open while it “takes positive steps to reorganize the business.”

Up to 178 stores will close throughout the U.S.—which is sure to hurt thousands of employees who rely on the retailer for a source of income. Operations are also said to halt in 40 countries.

Forever 21 sent out a newsletter to customers on Sept. 20, telling them not to believe the “misinformed” bankruptcy rumors.

For some devoted shoppers, the announcement comes as a shock. However, a number of brick and mortar stores have struggled to keep money flowing with the rise of ecommerce juggernauts like Amazon providing the convenience of speedy shipping.

Fashion outlets that have shuttered a part of their business or have gone out of business completely include other notable mall staples like Payless, Kohl’s, Dressbarn, Topshop, Ralph Lauren, Lord & Taylor and more.

Forever 21, which was founded by Korean-born American husband and wife Do Won and Jin Sook Chang in 1981, grew to amass a network of over 800 stores while becoming multi-billion dollar company. Despite this, the trendy fashion chain that covertly imprints bible verses regarding everlasting life on its shopping bags, couldn’t be spared from what some have dubbed the “retail apocalypse.”

Here are five reasons that may have contributed to Forever 21’s downfall.

1. Rapid expansion

In Forever 21’s “About Us” section of their website, it acknowledged that it was the fifth largest specialty retailer in the U.S. and was aiming to “become an $8 billion company by 2017 and open 600 stores in the next three years.” However, just like with any other business that aggressively expands, there is sure to be a whole lot of debt that comes with it.

The company also revealed that the average size of a Forever 21 store is 38,000 square feet while the largest is 162,000 square feet. A market study that observed the average rent paid by square foot in the U.S. for industrial space found that businesses classified under “special purpose” paid $6.50 per square foot. If that figure holds true for today’s standards, a 38,000-square-foot Forever 21 would cost about $247,000 for rent alone. Similarly, a 162,000-square-foot location would cost an astounding $1,053,000.

2. Bad publicity
According to a report by the social media analysis website Sprout Social, nine out of ten customers will stop purchasing from brands that lack transparency. These findings are a detriment to Forever 21 since the company has been embroiled in back-to-back lawsuits for trademark and copyright infringement for years.

Whether from big household name designers to small indie brands, Forever 21 has made a knockoff version for customer purchase. Gucci, Adidas and Puma are just a few big dogs that have attempted a courtroom battle with Forever 21. Pop singer Ariana Grande has filed a $10 million lawsuit of her own over the value brand “stealing her” image and likeness.

3. Fast fashion and the competition
Forever 21 might be known for their quick-turning duplications, but they are not alone in the fast fashion world. Competitors such as H&M and Zara have vied for the same consumer base that wants trendy clothing at an affordable or low-cost price point. Popular London-based ecommerce brands like ASOS and Pretty Little Thing have also taken a swipe at profits with their lucrative celebrity collaborations.

The Instagram famous Los Angeles-based brand Fashion Nova has also given Forever 21 a run for its money with shameless knockoff business strategy that churns out replicated designs in less than 24 hours.

4. Shifting consumers
Conversely, there is a buying base that opposes everything fast fashion stands for. These shoppers are generally concerned for the environment, whether it be through minimizing fabric waste or not supporting an industry that has brought on harsh working conditions. This desire for sustainable fair trade has allowed the secondhand clothing market to grow to an estimated $28 billion worldwide, according to a consumer survey from analytics aggregator Statista.

The call for body positivity in the fashion industry has also impacted Forever 21 despite the store having a dedicated plus size and curvy sections in U.S. stores. Outside the small pickings these departments have, Forever 21 highlights its ultra-thin models more frequently—which may have alienated its full-figured base that is said to have a buying power of about $46.4-billion according to business management consultants at Coresight Research.

Forever 21’s shipping of free diet bars over the summer also didn’t help the brand’s image.

5. Unfocused inventory
Although majority of Forever 21 stores offer various selections, the brand appears to have extended its reach too far. With its other lines like XXI Forever, For Love 21 and Heritage 1981, the retail store has carried a mixed bag of styles that are both overwhelming and in conflict with shoppers’ inner Marie Kondo call for minimalism.

The store has also dabbled in creating a home décor, tech accessory and cosmetics line that is cheap in price but lacking in durability. Forever 21’s sister brand, Riley Rose, which sells third-party beauty products never took off the way the company hoped. Even top beauty retailer Ulta is struggling with a shifting market that prizes skincare over makeup.

A January report in Business of Fashion said Forever 21 had its sights on doubling the number of Riley Rose stores. That doesn’t appear to be happening while the business reorganises its strategy under bankruptcy.

By Stephen Collinson for CNN

The Trump administration is frenetically throwing up road blocks in a belated grasp for a strategy to slow a Democratic impeachment machine the President is now branding a “coup.”

But the intrigue that has pitched Donald Trump’s presidency into its deepest-ever crisis took a new twist after the independent inspector general from the State Department, Steve Linick, asked for an “urgent” briefing with congressional committees on Wednesday about documents related to the Ukraine scandal. A congressional aide described the request as “highly unusual and cryptically worded.”

The dramatic development came after Secretary of State Mike Pompeo attempted to prevent witnesses linked to his department from appearing on Capitol Hill in the coming days. The move appeared to be an attempt to buy time to come up with a long term blueprint to save Trump by turning the politics of impeachment.

Pompeo’s initiative was at least more substantive than Trump’s tweeting and cable news appearances from conspiracy-theory touting supporters that constituted his early defense.

But the sharp Democratic response to Pompeo’s claims of bullying against potential witnesses, and a key source’s decision to show up anyway, suggested that the added gravity of a formal impeachment process could shift Washington’s balance of power.

It is only a week since House Speaker Nancy Pelosi formally announced an impeachment probe into evidence that Trump pressured Ukraine to dig up dirt on his potential 2020 rival Joe Biden. But the drama has turned Washington on its head and comprehensively altered the dynamics of the Trump presidency.
Trump appears under siege from multiple directions. Late Tuesday, for example, The New York Times cited administration officials as saying the President previously suggested fortifying his southern border wall with a trench filled with alligators and snakes and wanted to shoot undocumented migrants in the legs.

Fast-moving developments
The latest fast-moving developments show how Democrats are using their constitutional authority to quickly build a framework for their investigation.

“This is an extraordinary crime. I suspect this is the greatest crime a president has committed in my lifetime,” Rep. Mike Quigley, a Democratic member of the House Intelligence Committee told CNN’s John Berman Tuesday.
The pace is sure to heat up Wednesday with Pelosi and House Intelligence Chairman Adam Schiff and the President himself expected to hold news conferences.

Trump offered Americans a glimpse into the state of his mind at the end of a tumultuous day with a unfounded tweet that warned illegal attempts were underway to steal the votes and constitutional rights of his supporters.
“As I learn more and more each day, I am coming to the conclusion that what is taking place is not an impeachment, it is a COUP,” Trump declared.

Aside from the inflammatory social media posts, the White House clearly understands that its best interests lie in stalling the inquiry for as long as possible, likely with legal challenges challenging subpoenas to give its surrogates time to fog the case and to build public frustration with impeachment.
A day after being subpoenaed for documents related to his role in consultations with Ukraine, Rudy Giuliani, the President’s personal lawyer, engaged his own counsel, and in an historical echo chose former Watergate prosecutor Jon Sale.

The former New York mayor has not said if he will comply with the subpoena. But he could be an early test case of the administration’s intentions to gum up the impeachment works with contentious legal challenges that could last for months.
“I really have to study it. I can’t shoot from the hip,” Sale told CNN’s Michael Warren.
“Every time I turn around, Rudy’s on another TV show,” Sale continued. “He and I could have a conversation, and then I turn on the television and he could be doing something else.”

‘Intimidation and bullying’
Pompeo, one of the President’s most valued aides, launched the most serious attempt yet by the administration to disrupt the impeachment investigation.
In a letter to House Foreign Relations Committee Chairman Eliot Engel, he said the proposed timetable for witnesses to testify in the coming days was too compressed.
In a tweet, the nation’s top diplomat warned the request could be “understood only as an attempt to intimidate, bully, & treat improperly the distinguished professionals of the Department of State, including several career (foreign service officers).”

The Democratic response was swift, reflecting an apparent belief among party leaders that they have the upper hand over the administration in the early stage of the probe.
In a letter to Pompeo, who is in Europe, the chairmen of the House Intelligence, Foreign Affairs and Oversight committees said that holding back testimony “is illegal and will constitute evidence of obstruction of the impeachment inquiry.”

In effect, the chairmen were warning that an attempt to frustrate the impeachment inquiry could eventually itself turn into a rationale for impeachment.
The administration has been largely successful in derailing previous Democratic efforts to oversee the White House by launching legal challenges and sweeping executive privilege claims. But impeachment already looks like a different animal.

The lawmakers also accused Pompeo of intimidating State Department witnesses to protect himself and the Ambassador Kurt Volker, the former special envoy to Ukraine who had been scheduled for a deposition on Thursday, has made clear he still plans to show up, despite Pompeo’s letter.

The other officials schedules to be deposed by the House Foreign Affairs Committee include former US Ambassador to Kiev Marie “Masha” Yovanovitch, Counselor T. Ulrich Brechbuhl and Ambassador Gordon Sondland — who were mentioned in the whistleblower complaint that helped trigger the impeachment push.

A fifth official — Deputy Assistant Secretary George Kent — has overseen policy on Ukraine at the State Department since September 2018 and was previously the deputy chief of mission at the US Embassy in Ukraine.
Yovanovitch, who was previously scheduled to appear Wednesday, will now do so on October 11 with the agreement of both the Committees and counsel, a congressional aide told CNN.

Democrat calls for Trump to be jailed
The President stayed out of sight at the White House on Tuesday. But he was as active as ever on Twitter, seeking to discredit the whistleblower much as he attempted to impugn the credibility of special counsel Robert Mueller.
“If the so-called ‘Whistleblower’ has all second hand information, and almost everything he has said about my ‘perfect’ call with the Ukrainian President is wrong (much to the embarrassment of Pelosi & Schiff), why aren’t we entitled to interview & learn everything about…the Whistleblower,” Trump wrote, decrying another “Democratic hoax.”

In fact, the whistleblower’s complaint was judged urgent and credible by the intelligence community’s independent, Trump-appointed inspector general for the intelligence community Michael Atkinson.
And on Monday, Atkinson issued a highly unusual statement rejecting the central plank of Trump’s argument — that the whistleblower based his complaint on hearsay.

While events seemed to be running largely in the favor of Democrats on Tuesday, there was another sign of a breach in discipline that could harm their efforts to avoid the political pitfalls of impeachment.

“I’m calling on the GOP to stop Trump’s filthy talk of whistleblowers being spies & using mob language implying they should be killed,” California Rep. Maxine Waters tweeted. “Impeachment is not good enough for Trump. He needs to be imprisoned & placed in solitary confinement.”

The tweet was a far cry from Pelosi’s request for her party to approach the impeachment process in a non-partisan and “prayerful” manner.

CNN’s Kylie Atwood and Manu Raju contributed to this story.

By Jo Francis for Printweek

Antalis has described its first half performance as “resilient” in the face of declining overall demand for paper and supply issues caused by events at the Arjowiggins paper mills. However, one-off costs have resulted in increased losses for the period.

The group is the biggest distributor of paper, packaging, and sign and display materials outside of the USA. It has been working to establish a new shareholder structure since February, and its majority shareholder Sequana went into liquidation in May.

Antalis said the search for a new shareholding structure, with support from Goldman Sachs, continued and was “proceeding in line with the plan”.

The group’s results for the six months to 30 June were in line with its preliminary figures announced in July. Turnover fell by 5.4% to €1.072bn (£950m) on a like-for-like basis, while EBITDA was down by nearly 10% at €30.1m (2018: €36m).

The Papers business suffered a sharp decline in sales of 7.6% to €714.1m, growth at its Packaging business was described as “weak” with sales nudging up 0.3% to €254.2m, while Visual Communications was “stable” with sales down 2.4% at €103.9m.

The bottom-line loss for the period increased from €16m to €27m, with one-off costs including a €10.2m asset writedown mainly related to goodwill at its Latin American business, and restructuring costs of €9.8m. The group also implemented accounting standard IFRS 16 for the first time, which resulted in a further €3m hit to the figures.

Sales in the UK and Ireland slipped by 5.6% to €282m, with Antalis describing market conditions as “difficult… notably due to Brexit” although the UK did better than the general market contraction.

Chief executive Hervé Poncin said: “In H1 2019, the group’s operating performance was impacted by the decline in volumes of Papers in a market that contracted by around 7%, and by the bankruptcy of one of our graphic and recycled papers suppliers.

“Against this backdrop, we have continued to adapt our structure to changing patterns of demand and we have significantly reduced our overheads, particularly our logistics and marketing costs.”

Arjowiggins Graphic had supplied around 4% of the group’s purchases, in value terms.

Antalis stated that it had complied with its banking covenants and had strengthened its liquidity with an amended factoring agreement. This has increased its facility from €215m to €290m through the inclusion of an additional finance partner.

Net debt fell by 4.1% to €318m, although under IFRS 16 the net debt figure increases to €434m.

Sales at the group’s Papers division are expected to continue to decline, although it expected a better second half now the situation at Arjowiggins Creative Papers in the UK had been successfully resolved.

“In H2 2019, Antalis should benefit from the launch of new ranges of recycled products and the relaunch of Arjowiggins Creative Papers ranges following its management buyout. Packaging and Visual Communication should show resilience over the coming months and continue to grow their contribution to the Group’s consolidated gross margin,” the group stated.

It anticipates that full year sales will be down by between 6%-7%, with EBITDA margin of 2.7%-2.9%.

Antalis shares fell by 14% to €0.90 after the announcement.

Saudi oil attacks cause price wobble

Source: CNN

Investigators from Saudi Arabia and the United States of America have determined “with very high probability” that the weekend attack on the Saudi oil industry was launched from an Iranian base in Iran close to the border with Iraq.

What happened?
Ten drones performed co-ordinated strikes on key Saudi Arabian oil facilities knocked out half of the country’s oil capacity — more than 5-million barrels a day. This amounts to about 5% of the world’s supply. Saudi and US investigators have determined “with very high probability” that the attack came from an Iranian base, according to a source.

Who’s behind this?
Yemen’s Houthi rebels said they’re responsible for the attacks, but a spokesperson for the Saudi-led coalition in Yemen said that Iranian weapons were used in the oil field attack.

Where the US stands
President Trump said it looks like Iran was behind the attack but suggested it was too early to say for sure. Trump also insisted that he does not want war with Iran.

How it’s affecting oil
On Monday, US oil prices spiked by more than 14%. It was the biggest spike since January 2009.
Oil prices dropped sharply Tuesday, following Monday’s surge that sent shock waves around the world.

US oil futures dropped 4.6% to $59.98 per barrel, following a Reuters report that Saudi Arabian oil production would return to normal within two to three weeks. Investors took that as a positive sign about the impact of the weekend’s attacks on global oil supply.

Brent crude, the international benchmark, is down 5.8% at $64.99 a barrel.

How it could affect South Africans
According to Fin24, a strong rand rally over the past week put the petrol price on track for a cut in the first week of October. This would mean petrol price cuts of between 11c an 24c a litre.

The Automobile Association spokesperson Layton Beard says the massive increase in the global oil price will likely cancel out the forecast price cut.

By Eddie Spence for Bloomberg

President Donald Trump’s tariffs on Chinese imports are getting a lot of blame for slowing the global economy, but it’s all the uncertainty from his Twitter habit and trade policy more broadly that could be even more harmful.

According to a report by Bloomberg Economics’ Dan Hanson, Jamie Rush and Tom Orlik, uncertainty over trade could lower world gross domestic product by 0.6% in 2021, relative to a scenario with no trade war. That’s double the direct impact of the tariffs themselves and the equivalent of $585 billion off the International Monetary Fund’s estimated world GDP of $97 trillion in 2021.

China would be hit harder by the uncertainty factor, with its GDP lower by 1% compared with a 0.6% chunk taken out of America’s economic output, the analysis showed.

“The tweet is mightier than the tariff,” the Bloomberg economists wrote in their report.

The U.S. president’s social media posts on trade, many of which are about China, sometimes appear several times a day and other times not at all. His contradictory takes on the progress of negotiations with Beijing send a chill through businesses that are making decisions about investing and hiring.

A survey released last week by the Federal Reserve Bank of New York found a growing conviction among businesses that tariffs were hitting their bottom line.

The Fed responded to economic headwinds with a rate cut of 0.25% last month. The Bloomberg Economics report said that while monetary policy can be used to mitigate uncertainty shocks, it cannot prevent the damage entirely. If central banks respond to demand weakness, world GDP will be 0.3% lower in 2021 than it would be in a no-trade-war scenario.

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