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Coronavirus: Venture capital firms help laid-off start-up employees find new jobs

SINGAPORE – Venture capital (VC) firms across South-east Asia have launched a ‘community-led’ initiative to help start-up employees laid off due to the economic impact of coronavirus outbreak to find new opportunities.

The anchor of the initiative is a public database of affected employees who can opt to have their names, functions and contact details included in it. The database will be publicised on the social media platforms of the participating VC firms.

They include Saison Capital, FutureLabs, Jungle Ventures, Alpha JWC, Convergence Ventures, Patamar Capital, Rainmaking, TRIVE Ventures and Tribe Accelerator.

Interested applicants with at least one year of working experience can apply to have their names included on the database via a form found at www.SEAcosystem.com. Their application will be verified by one of the supporting VC firms before being listed on the database.

The database will also include a list of companies that are still hiring in the region.

The initiative is spearheaded by Chia Jeng Yang, principal at Saison Capital; Simin Liu, an analyst at FutureLabs Ventures; and Rachael De Foe, a freelance communications consultant.

They were inspired by a similar effort started by VC firms in the United States.

Said Joachim Vandaele, partner at FutureLabs Ventures: “Top talent is what makes or breaks ventures, so as an ecosystem, we have a collective interest and responsibility to keep the talent in South-east Asia. Customers come and go, financial capital flows in and out but human capital is what we need to hold onto.”

On Monday (March 30), the Monetary Authority of Singapore (MAS) said that it expects increasing job losses and fewer pay rises this year, as the economy heads into a deep recession.

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Fiat Chrysler does not see delay in PSA merger, FIOM union says

MILAN (Reuters) – Fiat Chrysler (FCHA.MI) did not mention any possible delay in the merger process with France’s PSA (PEUP.PA) during a call with unions on Tuesday, metal workers’ union FIOM said.

“No delay on the merger with PSA was mentioned to us,” FIOM representative Michele De Palma told Reuters, correcting an earlier FIOM statement which said a delay was “certain” given the current situation.

Union representatives held a conference call on Tuesday with FCA’s Chief Operating Officer for Europe, Middle East and Africa Pietro Gorlier to discuss the coronavirus emergency.

De Palma confirmed, however, that FCA said during the meeting that its industrial plan would suffer a delay.

Last week FCA’s controlling shareholder Exor (EXOR.MI) said it expected the merger with PSA would be completed early next year, as initially planned.

FCA was not available for comment.

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What the Federal Reserve has done in the coronavirus crisis

(Reuters) – The Federal Reserve has moved into overdrive to try to keep the U.S. economy from suffering lasting damage from the coronavirus pandemic, announcing an emergency interest rate cut on March 3 and rolling out new efforts almost weekly since, including slashing rates to zero and relaunching large-scale asset purchases.

The U.S. central bank, arguably the most powerful financial institution on Earth, has more than $5.3 trillion of assets on its books – the equivalent of roughly a quarter of annual U.S. economic output before the crisis. Its stockpile of assets will grow much larger under the litany of programs it has launched, although some will be held in what are known as special-purpose vehicles, or SPVs, rather than directly by the central bank.

Here’s a look at some of the steps taken by the Fed so far:

** RATE CUTS

The Fed cut rates twice on an emergency basis this month, the first time it has done that since the financial crisis in 2008. The first cut of a half percentage point was on March 3 and the second of a full point was on March 15, which brought the Fed’s overnight borrowing rate for banks back to near zero. The reduction is meant to keep down the cost of loans for banks – and by extension their customers – to ensure borrowers have ample access to credit during the crisis.

** REPO MARKET

The Fed has been intervening in money markets since last fall, when a cash shortage led to a jump in short-term borrowing rates. Policymakers had planned this year to scale back operations in the market for repurchase agreements, or repo, through which dealers can borrow cash. But as the economic threat posed by the coronavirus increased, the central bank pivoted to offering almost unlimited support in the overnight lending markets for cash. On March 31, the Fed also announced that it broadened its repo agreements with foreign central banks, allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

** QUANTITATIVE EASING (QE)

The Fed first employed QE in the financial crisis, starting in 2008. The idea is that through large-scale purchases of various types of bonds – mostly Treasuries and mortgage-backed securities – it helps ensure that longer-term interest rates like those for mortgages and car loans remain low and helps keep major purchases affordable for consumers and businesses. When it cut rates back to near zero on March 15, the Fed restarted these large-scale purchases and is now doing so with an open-ended commitment.

** DISCOUNT WINDOW

Banks in recent weeks have borrowed the most since 2009 from the Fed’s lending tool of last resort at the urging of the central bank. The so-called “discount window” is rarely used because banks are worried that using it could make them appear weak. But policymakers have lowered the rate charged on the funding to 0.25% and extended the length of the loans offered from one day to 90 days. As of last Wednesday, banks had borrowed more than $50 billion.

** CENTRAL BANK FOREIGN CURRENCY SWAP LINES

The Fed has standing agreements with five other major foreign central banks – the Bank of Canada, European Central Bank, Bank of England, Bank of Japan and Swiss National Bank – that allows them to provide U.S. dollars to their financial institutions during times of stress. The Fed has increased the frequency of the operations to daily from weekly. It also offered temporary swap lines here to nine additional countries to ease access to dollars, which are in high demand because the liabilities of many foreign governments and companies are denominated in the U.S. currency.

** TERM ASSET-BACKED SECURITIES LOAN FACILITY (TALF here)

Through an SPV, the TALF program will buy bundles of assets secured by auto loans, credit cards, student loans, loans backed by the Small Business Administration and other types of credit. Its aim is to make sure banks and other lenders such as auto finance companies have ample cash to keep making loans to consumers and businesses during the crisis.

** COMMERCIAL PAPER FUNDING FACILITY (CPFF here)

The Fed reintroduced the CPFF, a tool it used during the last financial crisis, to get money directly into the hands of large businesses, which are major employers. Like the TALF, it will use an SPV to make purchases of commercial paper, an essential source of short-term funding for many companies. The market had come under strain amid worries that companies hit by efforts to slow the spread of the coronavirus would not be able to repay their IOUs.

** PRIMARY DEALER CREDIT FACILITY (PDCF here)

Through this facility, the Fed offers short-term loans to the two dozen Wall Street firms authorized to transact directly with the central bank. The program offers funding of up to 90 days to primary dealers. A similar program run from 2008 to 2010 only offered overnight loans.

** PRIMARY MARKET CORPORATE CREDIT FACILITY (PMCCF here)

With this program, the Fed will act as a backstop for corporate debt issued by highly rated companies. Through an SPV, the PMCCF will buy bonds and issue loans to companies that can help them cover business expenses and stay in operation. The debt must be repaid to the PMCCF within four years.

** SECONDARY MARKET CORPORATE CREDIT FACILITY (SMCCF here)

Closely related to the PMCCF, under this program an SPV will purchase corporate bonds and exchange-traded funds in the secondary market, or the public market where these securities are traded after they are first issued. The market liquidity added by the Fed is meant to stabilize conditions in the corporate bond market and make it easier for companies to raise funds there. Only so-called investment grade securities are eligible for purchase.

** MONEY MARKET MUTUAL FUND LIQUIDITY FACILITY (MMFLF here)

This new facility is meant to keep the $3.8 trillion money market mutual fund industry functioning even when investors are withdrawing money at a fast clip. The tool offers loans of up to one year to financial institutions that pledge as collateral high-quality assets like U.S. Treasury bonds that they have purchased from money market mutual funds. The Fed indirectly encourages banks to buy assets from money market funds, reducing the odds that the funds will need to sell those assets at a loss to meet redemptions.

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What the Federal Reserve has done in the coronavirus crisis

(Reuters) – The Federal Reserve has moved into overdrive to try to keep the U.S. economy from suffering lasting damage from the coronavirus pandemic, announcing an emergency interest rate cut on March 3 and rolling out new efforts almost weekly since, including slashing rates to zero and relaunching large-scale asset purchases.

The U.S. central bank, arguably the most powerful financial institution on Earth, has more than $5.3 trillion of assets on its books – the equivalent of roughly a quarter of annual U.S. economic output before the crisis. Its stockpile of assets will grow much larger under the litany of programs it has launched, although some will be held in what are known as special-purpose vehicles, or SPVs, rather than directly by the central bank.

Here’s a look at some of the steps taken by the Fed so far:

** RATE CUTS

The Fed cut rates twice on an emergency basis this month, the first time it has done that since the financial crisis in 2008. The first cut of a half percentage point was on March 3 and the second of a full point was on March 15, which brought the Fed’s overnight borrowing rate for banks back to near zero. The reduction is meant to keep down the cost of loans for banks – and by extension their customers – to ensure borrowers have ample access to credit during the crisis.

** REPO MARKET

The Fed has been intervening in money markets since last fall, when a cash shortage led to a jump in short-term borrowing rates. Policymakers had planned this year to scale back operations in the market for repurchase agreements, or repo, through which dealers can borrow cash. But as the economic threat posed by the coronavirus increased, the central bank pivoted to offering almost unlimited support in the overnight lending markets for cash. On March 31, the Fed also announced that it broadened its repo agreements with foreign central banks, allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

** QUANTITATIVE EASING (QE)

The Fed first employed QE in the financial crisis, starting in 2008. The idea is that through large-scale purchases of various types of bonds – mostly Treasuries and mortgage-backed securities – it helps ensure that longer-term interest rates like those for mortgages and car loans remain low and helps keep major purchases affordable for consumers and businesses. When it cut rates back to near zero on March 15, the Fed restarted these large-scale purchases and is now doing so with an open-ended commitment.

** DISCOUNT WINDOW

Banks in recent weeks have borrowed the most since 2009 from the Fed’s lending tool of last resort at the urging of the central bank. The so-called “discount window” is rarely used because banks are worried that using it could make them appear weak. But policymakers have lowered the rate charged on the funding to 0.25% and extended the length of the loans offered from one day to 90 days. As of last Wednesday, banks had borrowed more than $50 billion.

** CENTRAL BANK FOREIGN CURRENCY SWAP LINES

The Fed has standing agreements with five other major foreign central banks – the Bank of Canada, European Central Bank, Bank of England, Bank of Japan and Swiss National Bank – that allows them to provide U.S. dollars to their financial institutions during times of stress. The Fed has increased the frequency of the operations to daily from weekly. It also offered temporary swap lines here to nine additional countries to ease access to dollars, which are in high demand because the liabilities of many foreign governments and companies are denominated in the U.S. currency.

** TERM ASSET-BACKED SECURITIES LOAN FACILITY (TALF here)

Through an SPV, the TALF program will buy bundles of assets secured by auto loans, credit cards, student loans, loans backed by the Small Business Administration and other types of credit. Its aim is to make sure banks and other lenders such as auto finance companies have ample cash to keep making loans to consumers and businesses during the crisis.

** COMMERCIAL PAPER FUNDING FACILITY (CPFF here)

The Fed reintroduced the CPFF, a tool it used during the last financial crisis, to get money directly into the hands of large businesses, which are major employers. Like the TALF, it will use an SPV to make purchases of commercial paper, an essential source of short-term funding for many companies. The market had come under strain amid worries that companies hit by efforts to slow the spread of the coronavirus would not be able to repay their IOUs.

** PRIMARY DEALER CREDIT FACILITY (PDCF here)

Through this facility, the Fed offers short-term loans to the two dozen Wall Street firms authorized to transact directly with the central bank. The program offers funding of up to 90 days to primary dealers. A similar program run from 2008 to 2010 only offered overnight loans.

** PRIMARY MARKET CORPORATE CREDIT FACILITY (PMCCF here)

With this program, the Fed will act as a backstop for corporate debt issued by highly rated companies. Through an SPV, the PMCCF will buy bonds and issue loans to companies that can help them cover business expenses and stay in operation. The debt must be repaid to the PMCCF within four years.

** SECONDARY MARKET CORPORATE CREDIT FACILITY (SMCCF here)

Closely related to the PMCCF, under this program an SPV will purchase corporate bonds and exchange-traded funds in the secondary market, or the public market where these securities are traded after they are first issued. The market liquidity added by the Fed is meant to stabilize conditions in the corporate bond market and make it easier for companies to raise funds there. Only so-called investment grade securities are eligible for purchase.

** MONEY MARKET MUTUAL FUND LIQUIDITY FACILITY (MMFLF here)

This new facility is meant to keep the $3.8 trillion money market mutual fund industry functioning even when investors are withdrawing money at a fast clip. The tool offers loans of up to one year to financial institutions that pledge as collateral high-quality assets like U.S. Treasury bonds that they have purchased from money market mutual funds. The Fed indirectly encourages banks to buy assets from money market funds, reducing the odds that the funds will need to sell those assets at a loss to meet redemptions.

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J.C. Penney furloughs staff, extends store closures amid pandemic

(Reuters) – J. C. Penney Co Inc (JCP.N) said on Tuesday it would furlough a majority of its hourly staff and salaried associates next month, the latest U.S. retailer looking to weather the financial strain from store closures due to the coronavirus pandemic.

Furloughed employees will continue to receive full health benefits and many are eligible to receive state unemployment benefits, the company said, adding it would extend store closures until it was safe to reopen.

Macy’s (M.N), Kohl’s (KSS.N), Gap (GPS.N) and other retailers have taken similar actions amid lockdowns imposed to curb the rapidly spreading outbreak, which has so far infected more than 163,000 and caused over 3,000 deaths in the United States.

Many of the Penney’s workers in supply chain and logistics centers were previously furloughed on March 20, and those furloughs will continue, the company said.

The company employed about 90,000 full-time and part-time employees as of Feb.1, according to its latest annual filing.

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Exclusive: American Airlines to retire more jets, including vintage 737s, in coronavirus downturn

CHICAGO (Reuters) – American Airlines Group Inc (AAL.O) is set to sharply increase the number of jets it is planning to retire beyond its announced plans as it accelerates a fleet transformation to respond to the coronavirus crisis, people familiar with the matter said.

Some 4,700 jets have been parked globally as airlines slash operations due to travel restrictions, according to Ascend by Cirium fleet data, and American’s decision confirms industry speculation that many of those older jets won’t fly again.

In addition to the retirement of 34 Boeing Co (BA.N) 757s and 17 Boeing 767s announced just two weeks ago, American now plans to also sunset a batch of 76 Boeing 737s it acquired between 1999 and 2001, nine Airbus SE (AIR.PA) A330-300s and 20 Embraer 190s, the people said.

The plans were announced by President Robert Isom in a video Q&A with employees on Sunday, where he said the arrival of new Boeing 737 MAX jets, expected later this year after a prolonged global grounding, could help facilitate the retirement of older jets that would be in need of heavy maintenance.

American is also considering retiring some of its 50-seat regional jets, he said.

American said on March 12 it was accelerating the retirement of its remaining Boeing 757s and 767s as it looks at removing older, less fuel-efficient aircraft from its fleet.

“Decisions beyond the 757 and 767 have yet to be finalized, and we continue to make refinements to our overall fleet plan,” American spokesman Ross Feinstein said.

The pace of aircraft retirements influences an airline’s cost structure since new aircraft are costly to buy but cheaper to run. It also gives a clue to potential future demand for new aircraft.

Some analysts are predicting a surplus of aircraft as a wounded airline industry emerges from the coronavirus lockdown into what many economists expect to be a broad recession.

But decisions by airlines to retire planes in 2020 and 2021 could trim that surplus, Ascend by Cirium consultancy head Rob Morris told an Airline Economics webinar on Friday.

The last two years saw a total of 1,130 retirements, he said. Aircraft demand is influenced by a combination of new production and the rate at which airlines retire older planes.

Airlines’ fleet plans had been structured around expectations that global travel demand would continue to grow this year and beyond, but now analysts do not expect passenger traffic to recover 2019 levels for some time.

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Southwest Airlines cutting more than 40% of flights in May as demand sags

WASHINGTON (Reuters) – Southwest Airlines Co (LUV.N) said Tuesday it will cut more than 40% of flights from May 3 through June 5 amid a sharp decline in travel demand from the coronavirus pandemic.

The U.S. airline said will fly 2,000 flights a day, down 1,700 over normal levels. The airline previously said it was cancelling 1,500 flights a day in April. Southwest said it will preserve more than 80% of itineraries it previously offered but said some non-stop flights will now require a connection. Southwest is also shortening its operational day, removing many departures previously scheduled before 7 am and after 8 pm.

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U.S. proposes minimum air service rules for airlines receiving assistance

WASHINGTON (Reuters) – The U.S. Transportation Department on Tuesday proposed minimum flight requirements for passenger airlines receiving aid from the government’s $50 billion grant and loan fund.

The department said air carriers that fly between cities five days a week or more would need to provide at least one flight per day five times a week between the points.

For those with fewer than one a day five times a week, they would only need to fly once per week. For cities where there are multiple airports, carriers could consolidate operations at a single airport.

The department said airlines could seek waivers for specific flights saying that “even with these reduced service levels, it may not be practicable for covered carriers to serve all points previously served.”

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Coronavirus lockdown leaves third of ‘ornamental growers’ facing ruin

A major part of the UK’s gardening industry could be destroyed by the coronavirus lockdown – with a third of “ornamental growers” facing ruin within weeks.

The Horticultural Trades Association (HTA) is asking the government to provide direct help to the sector which is facing sales losses of £687m by the end of June due to COVID-19.

And with around 70% of bedding plant sales made between March and the end of May, it warned at least a third of UK ornamental producers may fail in a matter of weeks.

The perishability and seasonality of plants means that an estimated £200m of seasonal plants will have to be scrapped across the ornamental horticulture industry.

HTA chairman James Barnes said: “We have hit a perfect storm in the UK.

“The seasonality and perishability that is unique to our industry means that growers are potentially facing stock losses on an ever-rising scale as each day passes.

“Stock is one of the biggest components of asset value in the sector – stock write offs will destroy the balance sheets of many and make it impossible for them to continue.

“We are calling for the government to work with the HTA, as the industry’s representative body, to come up with a financial support scheme to help those businesses which have had to scrap perishable stock and are facing a huge financial crisis.”

Around 650 businesses across the UK produce ornamental crops and employ more than 15,000 people directly and almost 30,000 indirectly.

Natalie Porter, of Porters Fuchsias in Merseyside, said: “Time is running out.

“Most of our summer stock has already been planted and will be ready in three weeks.

“Our remaining stock due to be planted will be ready in five weeks and go to waste in eight.

“We are facing a potential write-off of £350,000 in the next three weeks due to perishable stock. This would jump to £200,000 per week thereafter.”

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China PMI offers tiny relief to Asia as stocks head for dire end to quarter

SYDNEY/HONG KONG (Reuters) – Asian shares were set to close out a calamitous quarter by eking out a small rally on Tuesday as factory data from China held out the hope of a revival in activity, even as much of the rest of the world shut down.

China’s official manufacturing purchasing managers’ index (PMI) bounced to 52.0 in March, up from a record-low 35.7 in February and topping forecasts of 45.0.

Analysts cautioned the underlying activity probably remained well below par as the improvement measures the net balance of firms reporting an expansion or contraction. China’s National Bureau of Statistics also warned that the rebound didn’t signal a stabilization in activity, and was partly due to the very low base in February.

“The fact that the numbers were not in the 60s shows that this is not going to be a V shaped recovery,” said Cliff Tan East Asia head of global markets research at MUFG.

The number was enough of a relief though to help MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rise 0.94%. That still left it down 22% for the quarter, its worst performance since 2008.

Gains were modest at best. Shanghai blue chips .CSI300 rose 0.4% and South Korea .KS11 1.87%. Japan’s Nikkei .N225 eased 1%, to be down 20% since the start of the year.

E-Mini futures for the S&P 500 ESc1 were flat, EUROSTOXX 50 futures STXEc1 rose 0.7% while FTSE futures FFIc1 fell 0.25%.

Healthcare had led Wall Street higher, with the Dow .DJI ending Monday up 3.19%, while the S&P 500 .SPX gained 3.35% and the Nasdaq .IXIC 3.62%.

News on the coronavirus remained grim but radical stimulus steps by governments and central banks have at least provided some comfort to economies.

Infections in hard-hit Italy slowed a little, but the government still extended its lockdown to mid-April. California reported a steep rise in people being hospitalized, while Washington state told people to stay at home.

Trade ministers from the Group of 20 major economies agreed on Monday to keep their markets open and ensure the flow of vital medical supplies.

OIL OVERWHELMED

Portfolio management also played a part in the forex market where many fund managers found themselves over-hedged on their U.S. equity holdings given the sharp fall in values seen this month, leading them to buy back dollars.

That saw the euro ease back to $1.1015 EUR=, from a top of $1.143 on Monday, while the dollar index bounced to 99.34 =USD, from a trough of 98.330.

“Month‑ and quarter‑end rebalancing amid relatively thin liquidity was the major driver of currency markets in the Asia session,” said analysts at CBA in an note.

Demand for dollars from Japanese funds saw the dollar inch up to 108.45 yen JPY=, though it remained some way from last week’s peak at 111.71.

Oil prices steadied, after diving to the lowest in almost 18 years on Monday as lockdowns for the virus squeezed demand even as Saudi Arabia and Russia vied to pump more product.

U.S. crude added $1.12 to $21.2, while Brent crude futures gained 28 cents to $23.01 a barrel.

In a new twist, U.S. President Donald Trump and Russian President Vladimir Putin agreed during a phone call on Monday to have their top energy officials meet to discuss slumping prices.

“However, the reality is that the level damage to demand is likely to overwhelm any production cut agreement between major producers,” wrote analysts at ANZ in a note.

“The lockdown of cities around the world and the shutdown of the aviation industry will cause a fall in demand the industry has never seen before.”

In the gold market all the talk has been of a rush of demand for the physical product amid shortages in coins and small bars. Flows into gold-backed ETFs have ballooned by $13 billion so far this year, the most since 2004.

The metal was holding at $1,613 an ounce XAU=, well up from a low of $1,450 touched early in the month.

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