Mega-Mall Stake in Madrid Goes on Sale After Firm’s Collapse By Bloomberg


© Bloomberg. MADRID, SPAIN – JUNE 06: A general view of the main entrance of the shopping center on June 06, 2020 in Madrid, Spain. The Intu Xanadu Shopping Center is preparing with health security protocols to reopen next Monday, June 8. Spain has largely ended the lockdown imposed to curb the spread of Covid-19, which has caused the death of more than 27,000 people across the country. (Photo by David Benito/Getty Images)

(Bloomberg) — Intu Properties Plc’s stake in a major Madrid shopping center is being put up for sale as part of the collapsed U.K. landlord’s liquidation.

Administrators at KPMG have appointed broker CBRE Group Inc (NYSE:). to market Intu’s 50% share in the Xanadu mall, according to people with knowledge of the plan. No guide price has been set, said the people, who asked not to be identified because the information is private. The stake was valued at 233.8 million pounds ($311 million) in Intu’s 2019 annual report published in March.

Intu, owner of nine of the U.K’s top 20 shopping centers, fell into administration in June, buckling under the weight of a 4.5 billion-pound debt pile as the pandemic hit rents and shut off rescue options. The company had already agreed to sell off most of its Spanish holdings before the outbreak as it sought to raise cash and win a reprieve from lenders.

The U.K. firm bought the Xanadu mall, which boasts an indoor ski slope and about 220 stores, for 530 million euros ($626 million) in 2017, before selling a 50% stake in the property to Nuveen, the asset manager owned by the Teachers Insurance & Annuity Association of America.

Representatives of KPMG, CBRE and Nuveen declined to comment.

Investors have continued to buy up Spanish retail properties even as deals for U.K. malls collapsed. The country’s lower online retail sales and shorter, turnover-based lease terms have helped prop up rents and values. Spain has also bounced back from lockdown more quickly than the U.K., where shoppers have continued to stay away from stores in greater numbers.

That’s encouraged Intu’s administrators to push ahead with a sales plan for the Madrid mall, which is also less heavily indebted than most of the company’s other properties. Intu’s share was financed with about 131.5 million pounds of debt maturing in 2022 and was well within its borrowing limits at the last valuation, according to Intu’s accounts.

©2020 Bloomberg L.P.

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British economy suffered record collapse in the second quarter


A woman in a protective face mask waits for clients in a souvenir shop in landmark Southbank, a cultural center of London, as the city encourages internal tourism after global coronavirus lockdowns drastically shrunk international tourism to England, on August 10, 2020.


Dominika Zarzycka/Zuma Press

The British economy collapsed in the second quarter by the most on record, in the worst showing of any major economy during the pandemic.

The U.K. gross domestic product quarter-on-quarter fall of 20.4% in the second quarter was worse than even hard-hit France and Spain. It was double the roughly 10% declines of the U.S. and Germany during the period.

The 20.4% decline was slightly better than the 21.2% decline forecast by economists.

“The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and house building continuing to recover. Despite this, GDP in June remains a sixth below its level in February, before the virus struck,” said Jonathan Athow, ONS deputy national statistician and director general for economic statistics.

U.K. GDP did rise 8.7% in June, the ONS said, a rise suggesting the country already is out of a technical recession, which is defined as two consecutive quarters of contraction.

Even as the U.K. has opened up, it still has more restrictions than other advanced economies. The Goldman Sachs effective lockdown index for the U.K. is twice as high as France’s, and also above the U.S., Germany, Italy and Spain. People in Manchester, east Lancashire and parts of West Yorkshire are banned from meeting different households indoors.

Economists at Citi are forecasting a 15.5% rebound in the third quarter, but still are nervous about the state of the U.K. economy. “In recent weeks the recovery in household spending seems to have lost momentum. With downside risks to the labor market accumulating, the outlook remains relatively weak. We think the U.K. faces a relatively protracted path to economic recovery, with reconfiguration associated with both Brexit and COVID weighing from here,” they said in a note to clients.



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Coronavirus collapse is nothing less than ‘a depression — a pandemic depression’, warn top economists


Statues of unemployed men standing in line during the Great Depression at the Franklin Delano Roosevelt Memorial.


Agence France-Presse/Getty Images


‘This situation is so dire that it deserves to be called a “depression”—a pandemic depression … It seems disrespectful to the many losing their jobs and shutting their businesses to use a lesser term to describe this affliction. ‘


— Economists Carmen Reinhart and Vincent Reinhart

That’s the bleak assessment delivered by economists Carmen Reinhart and Vincent Reinhart in an article published online Thursday that will appear in the September/October issue of Foreign Affairs. Carmen Reinhart, a well-known Harvard economist, was appointed chief economist at the World Bank after completing the article. Vincent Reinhart was a top staffer at the Federal Reserve under Alan Greenspan and is now chief economist at BNY Mellon.

The memory of the Great Depression of the 1930s has made many economists reluctant to use the term to describe the current situation, they wrote. While the Great Depression was “wrenching in both its depth and its length in a manner not likely to be repeated,” they said, the 19th and early 20th centuries were, in fact, “filled with depressions.”

They noted that in recent global downturns, some engines of growth remained intact. Most recently, for example, emerging markets, notably China, were key source of growth in the 2008 financial crisis. “Not this time,” they said. “The last time all engines failed was in the Great Depression; the collapse this time will be similarly abrupt and steep. ”

The U.S. economy contracted at an annualized pace of 32.9% in the second quarter, according to official data, the sharpest since at least the late 1940s.

Some economists have argued, however, that the sharp contraction created as the pandemic forced the near-shutdown of the U.S. and other major economies will give way to a quick rebound and that the accompanying recession may have already ended. The stock market has roared back from its pandemic-induced plunge in February and March, with the S&P 500
SPX,
-0.13%

ending Wednesday less than 2% below its all-time closing high from Feb. 19.

The authors acknowledged that some important economies are reopening, reflected in improving business conditions across Asia and Europe and in a turnaround in the U.S. labor market. “That said, this rebound should not be confused with a recovery ,” they wrote.

In the worst financial crises since the mid-19th century, it took, on average, eight years for per capita GDP to return to the precrisis level, they noted, while the median was seven years. Historic levels of monetary and fiscal stimulus might allow the U.S. to fare better, but most countries don’t have the capacity to offset the economic damage from the pandemic, they said, which means the rebound “is the beginning of a long journey out of a deep hole.”

They see three reasons for a long slog back to economic growth: the hit to global demand from border closures and business lockdowns that have hit export-dependent economies hard; a sharp rise in unemployment that’s likely to remain stubbornly high; and the regressive impact of the crisis, which has seen hit those with lower incomes the hardest.

“There is no one-size-fits-all solution to these political and social problems,” they argued. “Officials need to press on with fiscal and monetary stimulus. And above all, they must refrain from confusing a rebound for a recovery.



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His fund is up 60% this year after he called the March bottom — now, he sees potential for a ‘severe collapse’


Michael Gayed says he’s not trying to scare anyone, but you wouldn’t know it from his latest take.

Back in May, the fund manager warned of the possibility of two crashes: first bonds, then stocks. With his ATAC Rotation Fund
ATACX,
-0.06%

continuing to deliver the goods — it’s up almost 60% so far this year to rank among the best in its category — he’s still waving the yellow flag.

“It is a wild time in the markets,” said Gayed, who also runs the Lead-Lag Report. “Despite a crippling global pandemic, where the U.S. is failing miserably at a response with daily record after daily record cases being broken, and a U.S. economy that seems to be teetering on the edge of yet another Fed Monetary Policy response, stock markets have not seemed to blink when recovering.”

Yes, 2020 is certainly unique, considering, as he pointed out, that stocks crashed by more than 30% at one point, only to rally almost 50% from there. All that in less than eight months.

After having been bullish near the March bottom, Gayed now says that leading market indicators could very well be signalling a “severe collapse” in stocks.

The yield on the 10-year Treasury
TMUBMUSD10Y,
0.534%

, for instance, is looking at around 0.5%, while the yield on the 30-year
TMUBMUSD30Y,
1.197%

is under 1.5%., which he says is setting up for a potential reversion to the mean.

“It’s often said that bond-market investors are the smart money and tend to lead the stock market in anticipating economic activity,” Gayed explained. “The fact that yields have not risen meaningfully (quite the opposite) in the very short term is quite troubling as historically such short-term movement has tended to precede major periods of equity stress.”

Add to that, action in the utilities sector, which is seen as a recession-proof, safe-haven investment, could spell trouble for the broader market, he said, pointing to this chart showing how the defensive investments have managed to outperform the S&P 500 in the past month:

“That should raise some red flags as an equity investor, and frankly this alone gives me pause,” he said. “A similar movement occurred right before the COVID crash this year.”

Lastly, complacency could become a serious issue, with Gayed pointing to several factors, including the wild recent trading antics of Robinhood traders.

“The S&P 500 is now positive in a year that is expecting economic catastrophe. The Nasdaq is flying. And no one seems to think the market can ever go down,” he wrote in a recent note. “It sure feels like everyone forgot that investing in stocks carries risk — and the conditions are changing so rapidly right now, it looks like risk might come back into full force.”

No big crash Monday, with the Dow Jones Industrial Average
DJIA,
+0.43%

, S&P 500
SPX,
+0.76%

and Nasdaq Composite
COMP,
+1.48%

all starting off the week in the green.



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The U.S. shale oil industry may collapse, new report says, after Goldman warns crude is set for a fall


The U.S. shale oil industry may collapse due to the sharp fall in oil prices because of coronavirus, a new influential report predicts.

The demand and price of oil tumbled due to the economic slowdown and has since begun to recover, but Australian think tank the Institute for Economics and Peace (IEP) warns a low price will affect political regimes in the Middle East, especially in Saudi Arabia, Iraq and Iran.


The impact of coronavirus may “result in the collapse of the shale oil industry in the U.S., unless oil prices return to their prior levels.”


— Institute for Economics and Peace

Its annual Global Peace Index, published on Wednesday, analyses tension around the world and compiles an index of the most peaceful countries. It suggests the impact of coronavirus may “result in the collapse of the shale oil industry in the U.S., unless oil prices return to their prior levels.”

While the price of oil has begun to recover, on Tuesday analysts at Goldman Sachs warned in a note that the rise in the oil price has been overdone and forecast a drop in Brent crude prices to $35 a barrel, from around $43 a barrel, within weeks.

Shale oil is produced by fracking, the controversial process of pumping high pressure water and sand underground to fracture rock and release valuable new energy reserves known as shale.

Some of the biggest producers of shale oil are Exxon Mobil
XOM,
-2.22%
,
Chevron
CVX,
-1.65%

and EOG Resources
EOG,
-4.25%
.

Read: Oil prices fall for a second session as investors worry about oversupply from Gulf producers

The IEP report says that the combined weakness in commercial, travel and industrial activity led to a plunge in oil prices in global markets.

“These markets were already affected by an oversupply, emanating from Russia and Saudi Arabia who could not agree on production curbs,” it says.

Read: Oil ends lower as extension of OPEC+ output cuts fail to stem oversupply worries

But on a positive note it goes on to rank the countries most likely to stage a swift economic recovery in the wake of the pandemic, using four indicators to calculate this.

China, Indonesia, Russia, Mexico and Australia all emerge as best placed to facilitate a recovery because they have low unemployment rates, low dependence on international trade, low tax revenue relative to gross domestic product, and low central government debt as a proportion to GDP.

IEP founder Steve Killelea said: “COVID-19 is negatively impacting peace across the world, with nations expected to become increasingly polarized in their ability to maintain peace and security. This reflects the virus’ potential to undo years of socio-economic development, exacerbate humanitarian crises and aggravate and encourage unrest and conflict.”

He also identified a predictable list of sectors hurt by the lockdown, which includes aviation, hospitality, tourism, retail and finance. Health care, telecoms, and food production are best placed.

One upside is that drug trafficking and other types of crime have seen a temporary reduction as a result of social isolation around the world. However, reports of domestic violence, suicide and mental illness increased.

Iceland remains the most peaceful country in the world, a position that it has held since 2008. It is joined at the top of the index by New Zealand, Austria, Portugal and Denmark.

Afghanistan remains the least peaceful country, a position it has held for two years, followed by Syria, Iraq and South Sudan.

Killelea said: “The fundamental tensions of the past decade around conflict, environmental pressures and socio-economic strife remain. It’s likely that the economic impact of COVID-19 will magnify these tensions by increasing unemployment, widening inequality and worsening labor conditions — creating alienation from the political system and increasing civil unrest. We therefore find ourselves at a critical juncture.”



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