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UK Gov 10 yr 0.21 -0.07

Ger Gov 10 yr -0.64 -0.02

Jpn Gov 10 yr 100.80 0.03 -0.01

US Gov 30 yr 114.86 1.54 -0.14

Ger Gov 2 yr 105.96 -0.80 -0.01

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Prices are latest for edition Data provided by Morningstar

Joshua Chaffin — Philadelphia

It took Karri Ray a cane, a bottle of
water, a folding metal chair and the
kindness of strangers to travel the
roughly 100 yards from a kerb to the
polling place in south Philadelphia to
cast her ballot on Tuesday evening. Ms
Ray, asthmatic and infirm, was also
propelled by something else: a seething
contempt for President Donald Trump.

“Anything to get his ass out,” her daugh-
ter, Toni, explained during one of three
pit stops in which an ailing Ms Ray
rested on the aforementioned chair as
she gasped for breath.

By yesterday morning, that proposi-
tion hung in the balance as the passion
and determination of voters in the vital
swing state of Pennsylvania had given
way to the clerical toil of counting more
than 1m mail ballots. It is a task that

could take days, election officials have
warned, leaving residents in a collective
state of agony. “It’s crazy,” said Anton
Moore, the Democratic leader for the
48th ward, summing up the stomach-
churning mood.

While nerves were jangling, the con-
test was playing out much the way many
election experts had predicted — and
feared: Mr Trump raced out to a big lead
among in-person voters, particularly in
the rural heartland that lies between
Pennsylvania’s urban poles, Philadel-
phia and Pittsburgh.

As of 3am yesterday, he enjoyed a
margin of about 657,000 votes over Joe
Biden out of more than 5m ballots
counted by that point, prompting him
to declare victory in a state that is essen-
tial to his re-election bid.

But yet to be processed were more
than 1m mail ballots from a record 2.5m

cast. The bulk of those are from the big
cities and urban areas that are expected
to tilt heavily toward Mr Biden. Like Ms
Ray, they appeared to be limping —
slowly but steadily — across the finish
line and narrowing the gap.

Under a contested ruling from the
Pennsylvania Supreme Court, mail bal-
lots can arrive and be counted up to
three days after election day.

The scenario that has stirred near-
universal dread is that the race is tight
enough that those late-arriving ballots
come into play and become the subject
of legal challenges that could rise to the
Supreme Court.

In anticipation of litigation, the state
had ordered that those ballots be kept
separate — a process that election law-
yers likened to stacking kindling for a
fire. The first legal matches were struck

Continued on page 4

Mountain of mail ballots looms over
Philadelphia in long push to final tally

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Report i PAGE 8

Beijing halted $37bn Ant
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FT reporters

Donald Trump and Joe Biden both
claimed they were on course to win the
US election yesterday after a rancorous
campaign disrupted by the coronavirus
pandemic drew to an end without a
clear winner.

With votes still being counted in sev-
eral battleground states 24 hours after
polls closed, Mr Biden took a narrow
lead in Wisconsin, Michigan and
Nevada, raising his hopes for an elec-
toral college victory — and the White

But the Trump camp vowed to fight
on and challenge the late counting of
votes in the courts. It requested a
recount in Wisconsin, saying Mr Trump
was “well within the threshold” to

request one and would “immediately do
so”. With the count also continuing in
Pennsylvania, a clear winner of the
2020 election may not emerge for days.

As states scrambled to count millions
of absentee ballots, neither candidate
had secured the 270 electoral college
votes needed to win the presidency.

Mr Trump defied polls that had
shown him trailing significantly head-
ing into election day, with his conserva-
tive base of supporters turning out in big
numbers. The US president won the
crucial swing states of Ohio and Florida,
as he did in 2016, as well as Texas, a bat-
tleground for the first time in decades.
Mr Trump also made gains among His-
panic voters, a crucial voting bloc for
Democrats, in Florida.

Mr Biden won Arizona and also

picked up traditional Democratic
strongholds such as California and New
York, which award a total of 84 electoral
college votes.

The two candidates were focused yes-
terday on the states that remained in
play: Georgia, North Carolina, Nevada,
Wisconsin, Michigan and Pennsylvania,
which accepts mail-in ballots within
three days of the poll.

The Trump campaign intensified its
efforts to cast aspersions on mail-in bal-
lots, with the president writing on Twit-
ter that he was “leading, often solidly” in
key battlegrounds. He added that his
lead “started to magically disappear as
surprise ballot dumps were counted”.

Mr Biden accused Mr Trump of mak-
ing an “outrageous” statement that
was a “naked effort to take away the

democratic rights of American citizens”.
“If the president makes good on his

threat to go to court to try to prevent the
proper tabulation of votes, we have legal
teams standing by ready to deploy to
resist that effort,” Mr Biden said. “And

they will prevail.” Mr Trump has tried to
paint the huge number of postal ballots
as unanticipated.

However, the state authorities that
administer US elections have known for
weeks that an unprecedented number of
Americans planned to vote early, by mail
or in person, because of the pandemic.

According to the US Elections Project
at the University of Florida, more than
100m Americans voted before Tuesday,
putting the US on course for a record
turnout when all the ballots are counted.

The Biden campaign expressed confi-
dence that the former vice-president
would win because the majority of
uncounted ballots in Wisconsin, Michi-
gan and Pennsylvania were from heavily
Democratic areas — particularly in
Michigan and Pennsylvania.

The Trump camp maintained that
the president would be re-elected.
Bill Stepien, his campaign manager,
said: “We are confident in our path-
way. We are confident in our math.”

Mr Biden can afford to lose more of
the battleground states than Mr
Trump and still win the White House.

The Democratic nominee could
lose Pennsylvania, North Carolina
and Georgia but still prevail if he
clinches Wisconsin, Michigan, Ari-
zona and Nevada.

If Mr Trump loses Pennsylvania, he
can afford only to lose Nevada, which
Hillary Clinton won in 2016, if he is to
still triumph in the election.
Reporting by Demetri Sevastopulo,
James Politi, Lauren Fedor, Courtney
Weaver, Aime Williams and Kiran Stacey

News & analysis pages 2-6
Oil shares climb page 10
Markets pages 12 & 13
Janan Ganesh
& Gillian Tett page 19
Lex page 20

President Donald Trump made key gains among Latino voters, particularly in Florida Carlos Barria/Reuters

‘To impugn absentee ballots as lesser votes is an affront to democracy’ Editorial Comment — PAGE 18

US election on a knife edge
3 Trump defies polls with strong showing and
vows to challenge late counting of votes in court

3 Biden takes narrow lead in key battlegrounds,
raising hopes of winning the White House

Joe Biden won Arizona and also traditional Democratic states such as New York and California Angela Weiss/AFP via Getty

NOVEMBER 5 2020 Section:FrontBack Time: 4/11/2020 - 19:07 User: nick.miller Page Name: 1FRONT USA, Part,Page,Edition: USA, 1, 1

Page 2

Layer 1

2 ★ FINANCIAL TIMES Thursday 5 November 2020

western states. During the Democratic
primary, Mr Biden emphasised he had
grown up in a working-class family in
Pennsylvania and was a longtime sup-
porter of workers’ unions.

Democrats hoped that background
would allow him to rebuild the “blue
wall” of Michigan, Wisconsin and Penn-
sylvania that Mr Trump broke four
years ago when he won the former Dem-
ocratic strongholds.

Mr Biden had stepped up campaign-
ing in Ohio in recent weeks after local
Democrats told him he had a chance of
victory. But Mr Trump won the rustbelt
state with almost the same level of sup-
port as he had in 2016, raising concerns
about neighbouring Pennsylvania.

Mr Trump had a strong lead in Penn-
sylvania early yesterday but the state
had more than 1m absentee ballots to
count. Democrats were hopeful that
African Americans and suburban
women in Philadelphia would help Mr
Biden win a state that had voted Demo-
cratic from 1992 to 2016.

“It’s just still too early to tell because
there are so many uncounted mail bal-
lots in Philadelphia,” said Brendan
Boyle, a Democratic congressman and
Biden supporter from Philadelphia as
he waited for a result yesterday. “They
still have more than half of the vote left
to count.”
See Editorial Comment, Opinion, Lex
and Markets Insight

Mr Biden emerged when results arrived
from Florida’s Miami-Dade, a 2.7m-
strong heavily Hispanic county that
includes Miami. While Florida was
viewed as one of the tightest swing
states, Mr Biden’s weakness with His-
panics in the area appeared to have
stopped the Democrats reclaiming the
state from Mr Trump.

“We as a party still have a lot of work
to expand the number of Latino voters
in particular who vote Democratic.
What happened in Florida is not accept-
able,” said Jim Manley, who served as a
top aide to Harry Reid, the former Dem-
ocratic Senate leader whose state of
Nevada boasts a very large Hispanic

Chuck Rocha, a consultant who
helped Bernie Sanders win a big propor-
tion of Hispanics in the Democratic pri-
mary race against Mr Biden, said the
Florida result underscored how the
Biden campaign erred in the state.

“Tonight proves the Latino vote is a
persuadable universe, but Democrats
did not treat it as such,” Mr Rocha said.
“So we are paying the price for not start-
ing early and often, as they did with per-
suadable white voters.”

Mr Rocha said that mistake would
resonate beyond Florida, though to a
lesser extent in states such as Arizona
that lacked Florida’s large numbers of
conservative Cuban Americans. Mr
Biden won Arizona, validating his strat-

Demetri Sevastopulo, Courtney
Weaver and Lauren Fedor

By the early hours of yesterday Donald
Trump and Joe Biden still did not know
who had won the presidential election
but one thing was clear: Democrats had
not secured the big victory some had

Heading into election day, Democrats
were not only confident they would
avoid a repeat of the surprise loss in
2016, but were counting on several fac-
tors to give Mr Biden a strong tailwind.
Instead, the Democratic challenger was
left in a nail-biting fight to the finish

Democrats had been buoyed by polls
that showed Americans — including
many Republicans — were frustrated
with how Mr Trump had handled the
coronavirus pandemic. They banked on
suburban Republican women abandon-
ing the president and argued that Mr
Biden had the right background to win
back white, working-class voters who
had switched to Mr Trump four years
ago. Finally, Democrats believed Mr
Biden would do better with black voters
than Hillary Clinton in 2016, and would
appeal to anti-Trump Hispanics.

But as the world waited for results
from key outstanding states — Nevada,
Wisconsin, Michigan and Pennsylvania
— some of the weaknesses of the Demo-
cratic campaign were apparent.

One of the first signs of problems for

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US electioN

Clockwise from main photo: ballots are processed in California; an election
watch party at the US embassy in Ulaanbaatar, Mongolia; a Democrat voter in
Florida; and, below, Joe Biden, the Democratic candidate — Zuma/DPA/AFP/Getty

Eric Platt and Colby Smith
New York
Katie Martin — London
Robin Wigglesworth — Oslo

Fading expectations of a decisive US
presidential election win for Joe Biden
boosted government bonds and the
shares of US technology stocks, as
investors abandoned trades based on
any “blue wave” Democratic sweep of
the White House and Congress.

The S&P 500 advanced 1.6 per cent in
early trading in New York yesterday, led
by tech stocks rather than the economy-
sensitive stocks that had been favoured
to climb in a blue wave scenario. The
Nasdaq Composite, which has far out-
paced the wider S&P 500 this year,
bobbed 2.7 per cent higher.

Investors also rushed into haven gov-
ernment bonds as they prepared for the
poll outcome to remain unclear for
days. The yield on the benchmark 10-
year US Treasury slid 0.13 percentage
points to 0.77 per cent, its biggest
decline since market gyrations in
March. Yields fall as a bond’s price rises.

Opinion polls had led investors to bet
that decisive Democratic victories
would spark another round of stimulus

for the pandemic-stricken US economy.
Those stimulus hopes are now fading.

Mr Biden may still clinch an unex-
pectedly tight race, but the Republicans’
strong showing in several battleground
states, and seemingly tight grip on the
Senate, have prompted money manag-
ers to prepare for the prospect that the
US could be left with a divided govern-
ment, clouding the investment outlook.

“The blue wave trade has been going
on since the summer and has built up
more recently, and I would expect it to
unravel now,” said Fabiana Fedeli, glo-
bal head of fundamental equities at
Robeco. Economic stimulus and the
path of the pandemic were more signifi-
cant drivers for markets than the out-
come of the election alone, she said.

The yield on the 10-year Treasury had
briefly eclipsed 0.9 per cent late on
Tuesday, hitting its highest since June,
on expecting that a big Democratic win
could fire up government spending, and
potentially inflation. That was expected
to place more downwards pressure on
longer-term bond prices, and send
yields rising. Yet yields dropped as
results poured in, reflecting how some
fund managers had been caught out.

“Markets need to have a serious look
at their systems,” said Didier Saint-
Georges, member of the strategic invest-
ment committee at French investment
house Carmignac. “Now we are back to
where we were before the blue wave
trade. We are back to fundamentals.”

Jim Leaviss, chief investment officer
of public fixed income at M&G, said that
the slim chance of the Democrats taking
the Senate meant that further big fiscal

stimulus was less likely to emerge.
“[That] means that in the event that the
US economy slows again, and a winter
Covid wave is likely, it will be down to
monetary policy to provide support.”

More bond purchases by the US Fed-
eral Reserve, more rate cuts — possibly
into negative territory — and so-called
yield curve control to keep bonds in
check “might come into play”, he added.
“Markets got what they really didn’t
want, with a lot of uncertainty.”

Donald Trump introduced more
nervousness yesterday, after he vowed
to go to the Supreme Court to halt the
counting of votes as he prematurely
claimed victory in the race. “In the next
few days there is going to be very messy
news flow,” said Mr Saint-Georges.

That kind of rhetoric may also be
helping to boost government bonds.
“Some people are using bonds as a safe
haven, reflecting the risk of a contested
election with bad outcomes,” said Toby
Nangle, global head of asset allocation at
Columbia Threadneedle. “But I see it as
a reduction in the likelihood of very sub-
stantial stimulus.”
Additional reporting by Laurence Fletcher
in London and Leo Lewis in Tokyo

Market reaction

Investors abandon trades based on ‘blue wave’ sweep

Investors rush into US
government bonds

Source: Bloomberg

10-year Treasury yield (%)






Oct 2020 Nov

Biden landslide hopes turn to nail-biting finish
Poor result among conservative Latino voters in Florida exposes a weakness in Democratic campaign strategy

‘We as a
party still
have a lot of
work to
expand the
number of

back the
vote was
for Biden’s

would remain Democratic. In Miami-
Dade, two Democrats who had taken
Republican seats two years ago were
ousted, partly because of the party’s
poorer than expected performance in
the Latino community. But they also
lost seats in Charleston, South Carolina,
and a swath of New York’s Long Island.

Democrats also failed to flip several
districts in the Houston, Austin and San
Antonio suburbs. Those losses contrib-
uted to Mr Biden’s failure to win Texas, a
state that had not voted for a Democrat
since 1976 but which has become more
liberal because of demographic

Mr Biden was hoping for better
results in the suburbs in Pennsylvania

and Michigan, two states crucial to
determining whether Mr Biden would
emerge victorious when all outstand-
ing votes were tallied.

Exit polls from ABC News found that
Mr Biden had a 3-point margin over Mr

Trump among suburban voters. Among
female suburban voters, Mr Biden led

Mr Trump 55 per cent to 44 per cent,
the polls found.

The suburban vote was
particularly important for
Mr Biden as a balance

against any weakness in
winning back the so-

called Trump Demo-
crats in Pennsylva-

nia and the Mid-

egy to try to expand the Democratic
base in a state that had voted for a Dem-
ocrat only once since Harry Truman
won in 1948.

The plan to attack Mr Trump over his
response to the pandemic also appeared
to have been less effective than the
Democrats had expected. The presi-
dent’s approval ratings appeared to dip
in early October, after he was hospital-
ised for Covid-19, and polls showed most
Americans disapproved of his handling
of his own infection.

But as election results trickled in, it
was clear that many voters had not cast
their ballots with Covid-19 in mind.
According to a CNN exit poll, the econ-
omy — the one issue where Mr Trump
consistently polled better than Mr
Biden — was the most important issue
for voters, followed by racial inequality
and coronavirus.

The Biden campaign also banked on
Republican women in the suburbs
abandoning the president. Many
Democrats looked to their sig-
nificant gains in the 2018
midterm elections — which
were driven by women — as
proof that the party could
replicate those results in
the presidential race.

But the party found
itself losing some of the dis-
tricts it had flipped in 2018
and that polls had suggested

The result
For live results
and what each
candidate has
to do to win

Subscribe to the FT today at

World Markets


Mar 30 prev %chg

S&P 500 2365.93 2361.13 0.20

Nasdaq Composite 5902.74 5897.55 0.09

Dow Jones Ind 20703.38 20659.32 0.21

FTSEuro�rst 300 1500.72 1493.75 0.47

Euro Stoxx 50 3481.67 3475.27 0.18

FTSE 100 7369.52 7373.72 -0.06

FTSE All-Share 4011.01 4011.80 -0.02

CAC 40 5089.64 5069.04 0.41

Xetra Dax 12256.43 12203.00 0.44

Nikkei 19063.22 19217.48 -0.80

Hang Seng 24301.09 24392.05 -0.37

FTSE All World $ 297.99 297.73 0.09


Mar 30 prev

$ per € 1.074 1.075

$ per £ 1.249 1.241

£ per € 0.859 0.866

¥ per $ 111.295 111.035

¥ per £ 139.035 137.822

€ index 89.046 89.372

SFr per € 1.069 1.072

Mar 30 prev

€ per $ 0.932 0.930

£ per $ 0.801 0.806

€ per £ 1.164 1.155

¥ per € 119.476 119.363

£ index 76.705 76.951

$ index 104.636 103.930

SFr per £ 1.244 1.238

Mar 30 prev %chg

Oil WTI $ 50.22 49.51 1.43

Oil Brent $ 52.98 52.54 0.84

Gold $ 1248.80 1251.10 -0.18


price yield chg

US Gov 10 yr 98.87 2.38 0.00

UK Gov 10 yr 100.46 1.21 -0.03

Ger Gov 10 yr 98.68 0.39 -0.01

Jpn Gov 10 yr 100.45 0.06 0.00

US Gov 30 yr 100.14 2.99 0.01

Ger Gov 2 yr 102.58 -0.75 0.00

price prev chg

Fed Funds E� 0.66 0.66 0.00

US 3m Bills 0.78 0.78 0.00

Euro Libor 3m -0.36 -0.36 0.00

UK 3m 0.34 0.34 0.00
Prices are latest for edition Data provided by Morningstar


AboastfulWhatsAppmessagehas cost
a London investment banker his job
and a £37,000 fine in the first case of
regulators cracking down on commu-
nications over Facebook’s popular

The fine by the Financial Conduct
Authority highlights the increasing
problem new media pose for companies
that need to monitor and archive their

Several large investment banks have
banned employees from sending client
information over messaging services
including WhatsApp, which uses an
encryption system that cannot be
accessed without permission from the
user. Deutsche Bank last year banned
WhatsApp from work-issued Black-

Berrys after discussions with regulators.
Christopher Niehaus, a former Jeffer-

ies banker, passed confidential client
information to a “personal acquaint-
ance and a friend” using WhatsApp,
according to the FCA. The regulator said
Mr Niehaus had turned over his device

The FCA said Mr Niehaus had shared
confidential informationonthemessag-
ing system “on a number of occasions”

Several banks have banned the use of
new media from work-issued devices,
but the situation has become trickier as
banks move towards a “bring your own
device” policy. Goldman Sachs has
clamped down on its staff’s phone bills
as iPhone-loving staff spurn their work-

Bankers at two institutions said staff
are typically trained in how to use new

media at work, but banks are unable to
ban people from installing apps on their

Andrew Bodnar, a barrister at Matrix
Chambers, saidthecaseset“aprecedent
in that it shows the FCA sees these mes-
saging apps as the same as everything

Information shared by Mr Niehaus
included the identity and details of a
client and information about a rival of
Jefferies. In one instance the banker
boasted how he might be able to pay off
hismortgage ifadealwassuccessful.

Mr Niehaus was suspended from Jef-
feries and resigned before the comple-

Jefferies declined to comment while
Facebook did not respond to a request
Additional reportingbyChloeCornish
Lombard page 20

Citywatchdog sends a clearmessage as
banker loses joboverWhatsAppboast

Congressional Republicans seeking to
avert a US government shutdown after
April 28 have resisted Donald Trump’s
attempt to tack funds to pay for a wall
on the US-Mexico border on to
stopgap spending plans. They fear
that his planned $33bn increase in
defence and border spending could
force a federal shutdown for the first
time since 2013, as Democrats refuse
to accept the proposals.
US budget Q&A and
Trump attack over health bill i PAGE 8

Shutdown risk as border
wall bid goes over the top



iUSbargain-hunters fuel EuropeM&A
Europe has become the big target for cross-border
dealmaking, as US companies ride a Trump-fuelled
equity market rally to hunt for bargains across the

iReport outlines longerNHSwaiting times
A report on how the health service can survive
more austerity has said patients will wait longer for
non-urgent operations and for A&E treatment while
some surgical procedures will be scrapped.— PAGE 4

iEmerging nations in record debt sales
Developing countries have sold record levels of
government debt in the first quarter of this year,
taking advantage of a surge in optimism toward
emerging markets as trade booms.— PAGE 15

i London tower plans break records
A survey has revealed that a
record 455 tall buildings are
planned or under construction
in London. Work began on
almost one tower a week
during 2016.— PAGE 4

iTillerson fails to ease Turkey tensions
The US secretary of state has failed to reconcile
tensions after talks in Ankara with President Recep
Tayyip Erdogan on issues including Syria and the
extradition of cleric Fethullah Gulen.— PAGE 9

iToshiba investors doubt revival plan
In a stormy three-hour meeting, investors accused
managers o�aving an entrenched secrecy culture
and cast doubt on a revival plan after Westinghouse
filed for Chapter 11 bankruptcy protection.— PAGE 16

iHSBCwoos transgender customers
The bank has unveiled a range of gender-neutral
titles such as “Mx”, in addition to Mr, Mrs, Miss or
Ms, in a move to embrace diversity and cater to the
needs of transgender customers.— PAGE 20


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For the latest news go to

Recent attacks —
notably the 2011
massacre by
Anders Breivik in
Norway, the
attacks in Paris
and Nice, and the
Brussels suicide
bombings — have
bucked the trend
of generally low
fatalities from
terror incidents in
western Europe

Sources: Jane’s Terrorism and Insurgency Centre

Terror attacks in western Europe

Highlighted attack Others

Paris Nice


A Five Star plan?
Italy’s populists are trying to woo
the poor — BIG READ, PAGE 11


Trump vs the Valley
Tech titans need to minimise
political risk — GILLIAN TETT, PAGE 13

Dear Don...
May’s first stab at the break-up

Lloyd’s of London chose Brus-
sels over “five or six” other
cities in its decision to set up an
EU base to help deal with the
expected loss of passporting

John Nelson, chairman of the
centuries-old insurance mar-
ket, said he expected other

insurers to follow. Most of the
business written in Brussels
will be reinsured back to the
syndicates at its City of London

The Belgian capital had not
been seen as the first choice for
London’s specialist insurance
groups after the UK leaves the

EU, with Dublin and Luxem-
bourg thought to be more likely
homes for the industry. But
Mr Nelson said the city won on
its transport links, talent pool
and “extremely good regula-
Lex page 14
Insurers set to follow page 18

Lloyd’s of Brussels Insurancemarket
to tapnew talent poolwithEUbase



A computer system acquired to collect
duties and clear imports into the UK
may not be able to handle the huge
surge inworkloadexpectedonceBritain
leaves the EU, customs authorities have

HM Revenue & Customs told a parlia-
mentary inquiry that the new system
needed urgent action to be ready by
March 2019, when Brexit is due to be
completed, and the chair of the probe
said confidence it would be operational

Setting up a digital customs system
has been at the heart of Whitehall’s
Brexit planning because of the fivefold
increase in declarations expected at

About 53 per cent of British imports
come from the EU, and do not require
checks because they arrive through the
single market and customs union. But
Theresa May announced in January that
Brexit would include departure from
both trading blocs. HMRC handles 60m
declarations a year but, once outside the
customs union, the number is expected

The revelations about the system,
called Customs Declaration Service, are
likely to throw a sharper spotlight on
whether Whitehall can implement a
host of regulatory regimes — in areas
ranging from customs and immigration
to agriculture and fisheries — by the
timeBritain leavestheEU.

Problems with CDS and other projects
essential toBrexit could force London to

adjust its negotiation position with the
EU, a Whitehall official said. “If running
our own customs system is proving
much harder than we anticipated, that
ought to have an impact on how we
press forcertainoptions inBrussels.”

In a letter to Andrew Tyrie, chairman
of the Commons treasury select com-
mittee, HMRC said the timetable for
delivering CDS was “challenging but
achievable”. But, it added, CDS was “a
complex programme” that needed to be
linked to dozens of other computer sys-
tems to work properly. In November,
HMRC assigned a “green traffic light” to
CDS, indicating it would be deliveredon
time. But last month, it wrote to the
committee saying the programme had
been relegated to “amber/red,” which
means there are “major risks or issues
apparent inanumbero£eyareas”.

HMRC said last night: “[CDS] is on
track to be delivered by January 2019,
and it will be able to support frictionless
international trade once the UK leaves
the EU . . . Internal ratings are designed
to make sure that each project gets the
focus and resource it requires for suc-

HMRC’s letters to the select commit-
tee, which will be published today, pro-
vide no explanation for the rating
change, but some MPs believe it was
caused by Mrs May’s unexpected deci-
sionto leavetheEUcustomsunion.
Timetable & Great Repeal Bill page 2
Scheme to import EU laws page 3
Editorial Comment & Notebook page 12
Philip Stephens & Chris Giles page 13
JPMorgan eye options page 18

customs risks
being swamped
byBrexit surge
3Confidence in IT plans ‘has collapsed’
3Fivefold rise in declarations expected

World Markets


Mar 31 prev %chg

S&P 500 2367.10 2368.06 -0.04

Nasdaq Composite 5918.69 5914.34 0.07

Dow Jones Ind 20689.64 20728.49 -0.19

FTSEuro�rst 300 1503.03 1500.72 0.15

Euro Stoxx 50 3495.59 3481.58 0.40

FTSE 100 7322.92 7369.52 -0.63

FTSE All-Share 3990.00 4011.01 -0.52

CAC 40 5122.51 5089.64 0.65

Xetra Dax 12312.87 12256.43 0.46

Nikkei 18909.26 19063.22 -0.81

Hang Seng 24111.59 24301.09 -0.78

FTSE All World $ 297.38 298.11 -0.24


Mar 31 prev

$ per € 1.070 1.074

$ per £ 1.251 1.249

£ per € 0.855 0.859

¥ per $ 111.430 111.295

¥ per £ 139.338 139.035

€ index 88.767 89.046

SFr per € 1.071 1.069

Mar 31 prev

€ per $ 0.935 0.932

£ per $ 0.800 0.801

€ per £ 1.169 1.164

¥ per € 119.180 119.476

£ index 77.226 76.705

$ index 104.536 104.636

SFr per £ 1.252 1.244

Mar 31 prev %chg

Oil WTI $ 50.46 50.35 0.22

Oil Brent $ 53.35 53.13 0.41

Gold $ 1244.85 1248.80 -0.32


price yield chg

US Gov 10 yr 98.63 2.41 -0.01

UK Gov 10 yr 100.35 1.22 0.02

Ger Gov 10 yr 99.27 0.33 -0.01

Jpn Gov 10 yr 100.36 0.07 0.00

US Gov 30 yr 99.27 3.04 0.01

Ger Gov 2 yr 102.57 -0.75 0.00

price prev chg

Fed Funds E� 0.66 0.66 0.00

US 3m Bills 0.78 0.78 0.00

Euro Libor 3m -0.36 -0.36 0.00

UK 3m 0.34 0.34 0.00
Prices are latest for edition Data provided by Morningstar


stance in Brexit negotiations, rejecting
Britain’s plea for early trade talks and
explicitly giving Spain a veto over any

European Council president Donald
Tusk’s first draft of the guidelines,
which are an important milestone on
the road to Brexit, sought to damp Brit-
ain’s expectations by setting out a
“phased approach” to the divorce proc-
ess that prioritises progress on with-
drawal terms.

The decision to add the clause giving
Spain the right to veto any EU-UK trade
deals covering Gibraltar could make the
300-year territorial dispute between
Madrid and London an obstacle to

Gibraltar yesterday hit back at the

clause, saying the territory had “shame-
fully been singled out for unfavourable
treatment by the council at the behest of
Spain”. Madrid defended the draft
clause,pointingoutthat itonlyreflected

Senior EU diplomats noted that
Mr Tusk’s text left room for negotiators
to work with in coming months. Prime
minister Theresa May’s allies insisted
that the EU negotiating stance was
largely “constructive”, with one saying it
was “within the parameters of what we
were expecting, perhaps more on the

Britishofficialsadmittedthat theEU’s
insistence on a continuing role for the
European Court of Justice in any transi-

Brussels sees little room for compro-

mise. If Britain wants to prolong its
status within the single market after
Brexit, the guidelines state it would
require “existing regulatory, budgetary,
supervisory and enforcement instru-
mentsandstructures toapply”.

Mr Tusk wants talks on future trade
to begin only once “sufficient progress”
has been made on Britain’s exit bill and
citizen rights, which Whitehall officials
believe means simultaneous talks are
possible if certainconditionsaremet.

Boris Johnson, the foreign secretary,
reassured European colleagues at a
Nato summit in Brussels that Mrs May
had not intended to “threaten” the EU
when she linked security co-operation
Reports & analysis page 3
Jonathan Powell, Tim Harford &
Man in the News: David Davis page 11
Henry Mance page 12

Brussels takes tough stance onBrexit
with Spainhandedveto overGibraltar

About 2.3m people will benefit from
today’s increase in the national living
wage to £7.50 per hour. But the rise
will pile pressure on English councils,
which will have to pay care workers a
lot more. Some 43 per cent of care
sta� — amounting to 341,000 people
aged 25 and over — earn less than the
new living wage and the increase is
expected to cost councils’ care services
£360m in the coming financial year.
Analysis i PAGE 4

Living wage rise to pile
pressure on care services

SATURDAY 1 APRIL / SUNDAY 2 APRIL 2017UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80

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For the latest news go to

Censors and sensitivity
Warning: this article may be
upsetting — LIFE & ARTS



Escape the taper trap
How high earners can evade
a pension headache — FT MONEY

The lure of the exotic
Robin Lane Fox on the flair
of foreign flora — HOUSE & HOME

How To Spend It

Chic new lodgings
in Scotland

Art of persuasionMystery deepens
over disputed painting of JaneAusten

Austen’s descendants insist the Rice portrait depicts her as a girl — seemagazine Bridgeman Art Library


Credit Suisse has been targeted by
sweeping tax investigations in the UK,
France and the Netherlands, setting
back Switzerland’s attempts to clean up
its imageasataxhaven.

The Swiss bank said yesterday it was
co-operating with authorities after its
offices inLondon,ParisandAmsterdam
were contacted by local officials
“concerningclient taxmatters”.

Dutch authorities said their counter-
parts in Germany were also involved,
while Australia’s revenue department
said itwas investigatingaSwissbank.

The inquiries threaten to undermine
efforts by the country’s banking sector
to overhaul business models and ensure
customers meet international tax
requirements following a US-led clamp-
down on evaders, which resulted in
billionsofdollars infines.

The probes risk sparking an interna-
tional dispute after the Swiss attorney-
general’s office expressed “astonish-
ment” that it had been left out of the
actions co-ordinated by Eurojust, the
EU’s judicial liaisonbody.

Credit Suisse, whose shares fell 1.2 per
cent yesterday, identified itself as the
subject ofinvestigations in the Nether-
lands, France and the UK. The bank said

it followed “a strategy offull client tax
compliance” but was still trying to
gather informationabouttheprobes.

HM Revenue & Customs said it had
launched a criminal investigation into
suspected tax evasion and money laun-
dering by “a global financial institution
and certain ofits employees”. The UK
tax authority added: “The international
reach of this investigation sends a clear
message that there is no hiding place for

Dutch prosecutors, who initiated the
action, said they seized jewellery, paint-
ings and gold ingots as part of their
probe; while French officials said their
investigation had revealed “several
thousand” bank accounts opened in
Switzerland and not declared to French

The Swiss attorney-general’s office
said it was “astonished at the way this
operation has been organised with the
deliberate exclusion of Switzerland”. It
demanded a written explanation from

In 2014, Credit Suisse pleaded guilty
in the US to an “extensive and wide-
ranging conspiracy” to help clients
evadetax. Itagreedtofinesof$2.6bn.
Additional reportingbyLauraNoonan in
Dublin, Caroline Binham and Vanessa
Houlder in London, andMichael Stothard

Credit Suisse
engulfed in
fresh taxprobe
3UK, France and Netherlands swoop
3Blow for bid to clean up Swiss image






390_Cover_PRESS.indd 1 19/01/2017 13:57

NOVEMBER 5 2020 Section:World Time: 4/11/2020 - 18:01 User: sanjay.gohil Page Name: WORLD1 USA, Part,Page,Edition: USA, 2, 1

Page 10

10 ★ FINANCIAL TIMES Thursday 5 November 2020

“actively exploring options” for the

Barcelona-based Cellnex was consid-
ered to be a likely candidate to acquire
the masts, or a stake in the now separate
and renamed CK Hutchison Networks,
after it raised €4bn via the issue of new
shares in July to pursue takeover oppor-

CK Hutchison said yesterday that it
was in talks with Cellnex over a disposal
that would depend on service agree-
ments being struck with the Spanish
company to accelerate the rollout of 5G

CK Hutchison is the latest company to
separate out its masts from its core tele-
coms operating business with the

fone, are considering floating stakes in
their infrastructure arms to crystallise
value without losing control of the asset.

The sale of Three’s towers has been
seen as a potential spur for further con-
solidation in the telecoms sector.

CK Hutchison’s failed attempt to buy
O2 in 2016 was complicated by its joint
ownership of the MBNL tower joint ven-
ture in the UK alongside BT.

Cellnex shares rose more than 5 per
cent after talks over a potential deal
were confirmed and it reported strong
results for the first nine months of the
year. Revenue grew 53 per cent to
€1.1bn while earnings before interest,
tax, depreciation and amortisation, as
well as one-off costs such as restructur-

Nic Fildes

CK Hutchison is closing in on a sale of its
large portfolio of mobile towers in
Europe to Cellnex, the acquisitive
Spanish telecoms infrastructure com-
pany, which would net the owner of the
Three mobile brand €10bn if a deal is

The Hong Kong-based group carved
out the assets, which comprise 29,100
sites across six European countries, in
August and said at the time that it was

Spain’s Cellnex in talks to
buy Three owner’s masts
in six European countries

Derek Brower — US energy editor

US oil and gas stocks rose while those of
renewable energy producers fell yester-
day, as traders gambled that even if Joe
Biden wins the White House, Demo-
crats’ probable failure to gain control of
Congress would kill plans for a clean-
energy revolution.

Mr Biden has proposed $2tn of spend-
ing in the next four years to decarbonise
US electricity by 2035 along the way to
hitting net-zero carbon emissions by
2050, with plans to expand clean power
generation and build a network of
charging stations for battery-powered

But the proposals hang in the balance
following Tuesday’s election, which
look set to deny his Democratic Party
the Senate majority needed to push the
programme through, especially follow-
ing the Supreme Court’s tilt to the right.

“If Biden prevails but Republicans
keep the Senate, they will prevent much
of the $2tn in green spending Democrats
favour,” said Bob McNally, head of con-
sultancy Rapidan Energy Group and a
former adviser to George W Bush.

“Court-packing, adding states, and
large tax hikes on oil and gas companies
go out the window.”

The market seemed to agree that
Tuesday’s vote — and the lack of a “blue
wave” handing the Democrats control of
Congress — would help fossil fuel pro-
ducers more than their clean energy

Shares in ExxonMobil, which only last
week reported its third consecutive
quarterly loss, rose yesterday along with
those of rival Chevron and the S&P 500
Energy index that mainly consists of oil
and gas companies.

By contrast NextEra, a power pro-
ducer with a growing clean-energy port-
folio whose market valuation recently
overtook Exxon’s, were down — as were
those in other clean-energy producers.
Denmark’s Vestas, a big supplier of wind
turbines to the US, also fell.

The election offered voters a stark
choice between Mr Biden’s climate-
focused plan — including his pledge
to rejoin the Paris climate accord
from which the US officially withdrew

Democrats’ probable failure

to gain control of Congress

puts $2tn proposals at risk

Mr Biden’s comments during one of the
pre-election debates that he would
“phase out” the oil industry.

“Will you remember that, Texas?” Mr
Trump said in the debate. “Will you
remember that, Pennsylvania, Okla-

The oil industry also claimed Mr
Biden’s proposals would curb drilling on
federal lands in states such as New Mex-
ico, home to part of the Permian Basin,
the world’s most prolific oilfield.

In an interview with the Financial
Times last month, Scott Sheffield, head
of shale driller Pioneer Natural
Resources, said US oil production would
fall 3 per cent a year if Mr Biden won the
White House.

But a modest victory for Mr Biden
without a Senate majority would — if
confirmed — force him to pursue a more
moderate energy agenda, even allowing
for compromise, said some oil and gas
industry figures.

“The shift toward lower-carbon
energy is not over, but it’s going to be on

yesterday — and Donald Trump’s efforts
to boost fossil fuels through deregula-
tion and scrapping rules to control pol-

This year’s coronavirus-induced oil
price collapse has scarred the US oil and
gas industry, where tens of thousands of
jobs have been lost, bankruptcies con-
tinue to mount and production has
fallen about 20 per cent.

The sector’s troubles made energy —
and its future in an economic recovery
— a theme in the election battle.

Mr Biden said his clean-energy deal
would create jobs in everything from
solar panel installations to cleaning up
abandoned oil and gas wells.

Mr Trump tried to depict his rival as a
green radical who would ban fracking,
the drilling technique that enabled the
shale revolution, at the cost of thou-
sands of jobs in swing states such as
Pennsylvania and Ohio. Mr Biden has
insisted fracking will not be “on the
chopping block” if he wins.

The president’s campaign seized on

Joe Biden plans
to decarbonise
US electricity by
2035 on the way
to hitting net-
zero emissions
by 2050 — Joe Raedle/
Getty Images

‘The shift is
going to be
on a more
absent a
blue wave’


ing and bonus payments, rose 68 per
cent, boosted by recent acquisitions.

However, pre-tax losses in the period
widened to €228m compared with
losses of €166m a year earlier.

The Spanish company has spent €7bn
on deals this year, having bought towers
in Portugal, Poland and the UK, funded
by debt and equity.

It now owns 61,000 sites and has a
market capitalisation of almost €28bn,
nearly double that of Spanish incum-
bent telecoms company Telefónica.

Giles Thorne, an analyst with Jeffer-
ies, said the results helped justify the
performance of the company’s stock.
“Once again, Cellnex does much to jus-
tify its year-to-date share gains.”

CK Hutchison nears €10bn towers sale

a more realistic timeline absent a blue
wave,” said Dan Eberhart, head of oil-
field services company Canary and a
vocal Trump supporter.

“The truth is that Republicans are
supportive of policies to reduce carbon
emissions. But they just think it needs to
be done through increased competition
and market-oriented policies.”

Lobbyists in Washington said the
need to win cross-party support for a cli-
mate plan would dominate Mr Biden’s
strategising around new energy legisla-

“This opens the door to addressing cli-
mate change in a way that is not only
comprehensive but bipartisan,” said
Frank Maisano, a consultant at
Bracewell, which represents energy cli-
ents in Washington.

“A $2tn climate plan will have to take
the shape of a $2tn jobs plan with some
climate thrown in.”

Additional reporting by Leslie Hook and
Myles McCormick
See Lex

Joe Miller — Frankfurt

BMW’s third-quarter profits grew
almost 10 per cent as pent-up demand,
primarily in Asia, helped the German
brand post the best sales figures in its

Sales in China, BMW’s largest and most
profitable market, surged more than 31
per cent in the quarter to the end of Sep-
tember compared with the same period
in 2019.

The luxury group’s European sales
also increased 7 per cent from a year
earlier, contributing to a record of more
than 675,000 sales in total worldwide.

The rebound in demand helped BMW
report a pre-tax profit of €2.5bn for the
period, up from €2.25bn in the same
quarter last year.

Two weeks ago, BMW revealed it had
more than €3bn in free cash flow in the
third quarter of the year, comfortably
beating market expectations.

However, the manufacturer warned
yesterday that its automotive business,
which includes the Mini and Rolls-
Royce brands, could still make no profit
for the whole of 2020, saying it “contin-
ues to assume that demand in all key
markets will be significantly reduced in
light of the coronavirus pandemic”.

Nicolas Peter, BMW’s chief financial
officer, cautioned that “the business

environment has remained extremely
volatile”, emphasising that the company
experienced its worst-ever drop in sales
in the previous quarter.

“Now the situation in Europe is wors-
ening again,” he added. “We have never
recorded swings like this within such a
short period of time.”

Global sales are still 12.5 per cent
lower for the first nine months of 2020
compared with the same period in 2019.

The Munich-based group also
announced that all four of its German
plants would be producing battery-pow-
ered vehicles “in the foreseeable
future”, as it pushes ahead with plans to
put close to 5m pure electric cars on the
road over the next decade.

By the end of next year, BMW, which
was an electric car pioneer with its i3
model, said it would have a total of five
electric cars on the market, adding
the iX3, iNEXT and i4 to its line-up,
alongside the i3 and Mini Cooper.

While BMW has ploughed more than
€4bn into research and development
this year, largely into electric and hybrid
driving technology, the company is
slashing costs, with at least 6,000 jobs
set to be cut across the group.

BMW’s results come after domestic
rival Daimler reported that its net prof-
its increased nearly a fifth in the third
quarter to almost €2.2bn, thanks to a
strong rebound in sales of its Mercedes-
Benz cars in China.

Volkswagen, which owns premium
brands Audi and Porsche, also returned
to profit in the three months to the end
of September, after posting a loss of
€1.4bn for the first six months of the

BMW profits
jump 10% after
China rebound
spurs record

Energy. Green spending

US oil shares climb as renewables sector slides

‘The situation in Europe is
worsening. We have never
recorded swings like this
within such a short period’

Telecoms Automobiles

Harry Dempsey and Alice Hancock

After transforming the fortunes of hand
sanitiser and soap producers, the pan-
demic looks set to do the same for
another previously unheralded indus-
try — manufacturers of outdoor heaters.

A wave of new restrictions on indoor
gatherings in western countries heading
into winter has set off a scramble for
heaters that will allow people to social-
ise safely and warmly.

Buyers range from households keen
to meet friends and family outside to
pubs, bars and restaurants desperate to
attract enough customers so they can
stay in business through to the spring.

“We’ve been in this business for 55
years and we’ve never seen demand like
the last three months,” said Pete Arnold,
chief executive of AEI Corporation, an
outdoor heating supplier.

Despite England’s pubs, bars and res-

taurants having to shut for much of
November as part of a second lockdown,
executives in the UK hospitality indus-
try say outdoor heated space will be
vital to their fortunes once they are
allowed to reopen.

Phil Urban, chief executive of Mitch-
ells & Butlers, one of the UK’s largest bar
chains, said the group would press
ahead with a £1.5m investment in
heated and covered outside spaces.

“The view is as soon as we do open we
will need those outdoor spaces. It’s diffi-
cult to see over the next three, four, five
months being able to operate normally,”
he said.

England’s second lockdown starts
today and is scheduled to last until
December 2.

Heaters aimed at domestic use retail
for between £50 and £100, but prices
can reach up to £800.

“People are becoming less price-sen-
sitive,” said Paul Morey, chief executive
of Herschel Infrared Heaters, a Bristol-
based manufacturer and supplier.

But manufacturers and distributors
in the US, the UK, Australia and China
said the record demand risked pushing
a supply chain dependent on shipping

outdoor spaces, households have been
preparing for months of winter socialis-
ing in their gardens.

Elizabeth Terry, a retired doctor from
Wiltshire who is vulnerable to infection
due to cancer treatment, said she had
not entertained inside at all due to Cov-
id-19 and had spent £300 on her third
electric outdoor heater last month.

“It’s been a life saver for us. We’ve sat
outside with friends of ours at 7 degrees
outside,” she said.

Mr Levy reckons that England’s sec-
ond lockdown will provide some tempo-
rary respite for suppliers.

“It’s a bit of a relief as we were not cop-
ing with the level of demand,” said Mr
Levy, who plans to use the window to

If distributors in the UK and US are
struggling to get hold of heaters, manu-
facturers in China have not been able to
produce them quickly enough.

Sam Xue, general manager at Liangdi,
a Changzhou-based manufacturer, said
that the company had increased its
workforce by 30 per cent since the sum-
mer and production was running at
1,000 units a day — double last year’s

The heaters come in two broad types:
those powered by gas that are less envi-
ronmentally friendly and dominate the
US market, and electric infrared ones.
Concern over their effect on the envi-
ronment had prompted France to out-
law both types this winter, but the ban
has been pushed back until the spring
because of the pandemic.

It is one reason why some are refusing
to join the rush.

“They are expensive to run, they don’t
last that long, and they are not good for
the environment,” said Ralph Findlay,
chief executive of UK pub group
Marston’s, which has left heaters out of
its plans to navigate the pandemic.

But for other UK pub groups, the
question of heaters’ green credentials
takes second place to trying to stay in
business once allowed to reopen.

Jamie Atherton, general manager at
Quarter, a Bristol-based group of bars,
hotels and workspaces, which created
outdoor areas with heaters at two ven-
ues and plans to reconfigure more space
during the lockdown, is unequivocal.
“We do this or go down.”
Additional reporting by Judith Evans in
London and Sun Yu in Beijing

Industrial goods. Distribution snags

Surge in demand for outdoor heaters raises pressure on supply chain
China manufacturers bolster

capacity as restaurants, pubs

and households snap up units

the bulk of heaters from Asia’s largest
economy to breaking point.

“The entire supply chain has broken
down,” said Mr Arnold of AEI.

Steve Levy, managing director of Heat
Outdoors, a Hertfordshire-based dis-
tributor, said Chinese manufacturers
that typically deliver gas heaters within

six to eight weeks could now only do so
by February or March. As a result, the
company resorted to paying for 1,000
units to be flown in last weekend, even
though rates for air freight have trebled.

While England’s new lockdown only
permits people to meet one other per-
son from another household in public

One Changzhou maker has expanded its workforce 30% and doubled output

former having attracted much higher

The plunge in share prices across the
sector, combined with high levels of
debt and the need to invest in 5G
upgrades, has pushed some networks to
sell their towers to specialists such as
Cellnex or infrastructure investors such
as KKR.

Other companies, including Voda-

The disposal of Three’s
assets has been seen as a
potential spur for further
consolidation in the sector

NOVEMBER 5 2020 Section:Companies Time: 4/11/2020 - 18:13 User: jon.wright Page Name: CONEWS1, Part,Page,Edition: USA, 10, 1

Page 11

Layer 1

Thursday 5 November 2020 ★ FINANCIAL TIMES 11

Joe Miller — Frankfurt

As European governments combat a
resurgent pandemic, the chief executive
of Volkswagen, the world’s largest car-
maker, is fighting his own battle.

Since taking the top job in 2018, Her-
bert Diess has been driven by a fear that
the German group will be left behind as
the era of the combustion engine gives
way to that of the electric vehicle.

“Many of our differentiators, all our
knowledge, our actual capabilities, will
not be as important any more,” Mr Diess
told the Financial Times in an interview
at VW’s headquarters in Wolfsburg.

“This is exactly what happened to
Agfa or Kodak” he added, referring to
the photography companies upended
by technology. “They knew what was
coming, but they still couldn’t change.”

Volkswagen has already pledged to
spend €33bn on its electric vehicle busi-
ness, an investment Mr Diess hopes will
eventually triple the company’s market
capitalisation to €200bn and secure its
future as a heavyweight that can com-
pete against pioneers such as Tesla.

But as the pandemic threatens more
pain for the car sector, pointing to the
complacency of Kodak may not be
enough to persuade everyone — inside
and outside VW — that a profitable elec-
tric future is within his grasp.

After shutdowns at battery plants this
summer delayed deliveries of VW’s first
mass-market electric car, the ID. 3, and
Audi’s e-tron, the group is in danger of
missing tough EU emissions targets in
2020, and could be fined hundreds of
millions of euros. Unions have also bris-
tled at the cost cuts needed to pay for the
transition, while shareholders worry
that recent missteps have weakened the
62-year-old’s leverage in a highly politi-
cal organisation.

It is a predicament that has even
drawn sympathy from Tesla founder
Elon Musk, who tweeted last month
that Mr Diess was “in a tough position
with so many constituencies to please”.

Some of Mr Diess’s woes are self-
inflicted. In June, he was forced to apol-
ogise to VW’s supervisory board, which
includes workers’ representatives, after
accusing members of being responsible
for damaging leaks about software com-
plications with the new Golf model.

He subsequently relinquished control
of the VW brand, the largest of the
group’s 12 marques, a position he had
held since 2015, when he joined the
company from rival BMW.

In his office overlooking the Wolfs-
burg plant, Mr Diess acknowledged the
boardroom drama had led to “scepti-
cism” about his ability to transform VW.

“We have to prove that governance is
working” he added. “Is it still hard work
to convince all stakeholders; to take
them along? Yes, because it’s complex.
It’s very unionised. There are different
interests within the group”.

He also dismissed suggestions that
troubles may flare as VW’s truck subsid-
iary, MAN, plans to axe 9,500 roles to
fund an expansion into electric technol-
ogy. When MAN’s management tore up
an agreement with unions in Septem-
ber, the head of VW’s works council,
Bernd Osterloh, warned that the com-
pany would be “well advised to not link
restructuring with the spectre of unem-

After the turbulence of the summer,
something of a truce has been achieved.

“It seems [Mr Diess] came to terms with
how things are run here at VW,” said a
person close to the works council, who
added that the executive is much more
communicative with union bosses.

But even if relations with the unions
improve further, it will do little in the
short-term to revive VW’s share price,
which has lagged behind European
rivals this year.

“VW lost some pace in the last few
months,” said Ingo Speich, a portfolio
manager at institutional investor Deka,
and was engaged in “a power struggle”.

Mr Diess says shareholders should
wait a few months before delivering
their verdicts. “The proof point will be
towards the end of this year and into
next year when people will see that [the
transition is] working, that we can sell
the cars, that the demand is there, that
we can deliver on our promises, he said.

And VW is pulling ahead of tradi-
tional rivals in the electrification race.
The group recently overtook the
Renault-Nissan alliance to become the
largest seller of electrified vehicles in
Europe, and is on course to become the
largest in the world within a couple of
years. After a slow start, it is also nearing
full capacity for production of the ID. 3
and is about to launch several more

Pursuing his electric and software
ambitions is not the fastest route to the
€200bn valuation Mr Diess is aiming
for. Analysts instead recommend float-
ing a part of brands such as Porsche.

“VW has such valuable assets, if they
were to restructure to a holding model,
they could lift so much capital and use it
to innovate at such an amazing pace,”
said Arndt Ellinghorst at Bernstein.

But Mr Diess is aware that such deci-
sions would have to win the approval of
the Porsche-Piëch family, who own
more than 53 per cent of VW’s voting
capital and remain cautious about
restructuring the company’s portfolio.

In a year turned upside down by the
virus, the VW boss also knows he needs
to stay focused on keeping the company,
whose pre-tax earnings have fallen 85
per cent so far this year, in the black.

“If we can keep the economy running
and plants running, we should still be
able to deliver a good last quarter,” he
said. Amid the crisis, he added, VW is
“making progress” in restructuring its
internal supply chains, and reducing

“Is it fast enough for the capital mar-
kets?” he asked aloud, referring to the
electric race VW is running. “Probably
not, but, it’s quite fast for Volkswagen.”

Diess closes in on VW electric dream
After missteps, head of German carmaker says ‘proof point’ for investors is within sight

VW aims to steal Tesla’s crown VW Group
Global electric car sales, year to Sep (’000 units)*

Sources: Investment Company Institute; Refinitiv; Bloomberg
* Includes battery electric and plug-in hybrids

0 50 100 150 200 250 300

Renault alliance**



Geely-Volvo Cars


** Renault-Nissan-Mitsubishi

Share prices and index, rebased



Jan 2020 Oct

Stoxx Europe 600 Auto & Parts index


Pre-tax earnings (€bn)







2012 14 16 18 20

VW earnings recovered
last quarter but are still down

85% year to date compared
with the same period in 2019

Madison Darbyshire and
Stephen Morris — London

Barclays has been ordered by regula-
tors to repay millions of pounds in
interest on improperly sold timeshare
loans in Malta and faces a further inves-
tigation that could force the bank to
reimburse debt payments in full.

In a letter to borrowers last week, the
UK lender acknowledged it had been
told by the Financial Conduct Authority
to hand back interest already charged
on loans issued between April 2014 and
April 2016 by timeshare operator Azure

Barclays will also cancel future inter-
est due on the more than 1,400 loans.

Barclays Partner Finance was the
banking partner for Azure Resorts, and
underwrote financing agreements sold
to holidaymakers. Although Azure
Resorts was licensed by the FCA to sell
loans, the employees brokering the
financing agreements were working for
another company, Azure Services,
which was not authorised by the FCA
until April 25 2016.

The repaid and waived interest
amounts to an estimated £26m, about
half of the value of the £48m of loans in
question, according to Malaga-based

law firm M1 Legal, which represents the
borrowers whose cases were reviewed
by the FCA. Barclays said that figure
could be “materially overstated”, but
declined to provide an estimate.

Barclays must also install an “inde-
pendent assessor” to review whether
each of the timeshare loans was afforda-
ble. If not, the bank will be required to
cancel the loans and reimburse custom-
ers for all payments, including an addi-

tional 8 per cent interest, according to
the letter to borrowers seen by the
Financial Times.

Andrew Cooper, chief executive of
European Consumer Claims, a firm that
helps people out of improper timeshare
contracts, said the FCA’s decision set an
important precedent.

While the sum is a “drop in the
bucket” for the bank, “there are billions
of pounds of timeshare loans in this
marketplace that all fit the terms of
these breaches”, Mr Cooper said.

The interest reimbursement is a sig-
nificant portion of the loans, which gen-
erally have interest rates above 9 per
cent. In one Barclays financing agree-
ment seen by the FT, a 2014 loan for just
over £20,000 carried a rate of more
than 9.5 per cent over 15 years — equat-
ing to total interest of £17,420, almost
doubling the cost of the loan.

Barclays said it ended its relationship
with Azure in 2018, but “we recognise
that between April 2014 and April 2016
we did not provide the right level of

Azure Services Ltd did not respond to
a request for comment. Both Azure
Resorts Ltd and Azure Services Ltd
began liquidation proceedings in April.
See Lombard


Barclays forced into timeshare redress

The UK lender has been told to repay
interest on timeshare loans in Malta

Herbert Diess
says he is wary
of the business
another Agfa or
Kodak, bound to
old technology
in a fast-
world — Ronald Wittek/

‘We have a
because the
car is really
and Google
can’t do a
car today’

David Keohane — Paris
Owen Walker — London

Crédit Agricole warned there was no
visibility at the “end of the tunnel” in
the face of a resurgent coronavirus
pandemic in Europe but increased its
provisions for bad loans by less than

The caution from the French lender
came as its third-quarter profits fell 19
per cent from a year earlier, to €977m.
The bank’s revenues climbed 2 per cent
to €5.2bn during the same period.

Although the outlook for the French
economy is deteriorating, Crédit Agri-
cole’s third-quarter results beat fore-
casts. Analysts had expected net income
of €790m, while the bank’s revenues
were 4 per cent above expectations,
according to Jefferies.

The Paris-based lender’s better than
expected results were in line with Euro-
pean and US peers, as bank bosses on
both sides of the Atlantic struck a san-
guine tone in their third-quarter earn-
ings despite a second wave of the pan-
demic gathering pace.

On Tuesday, Crédit Agricole’s rival
BNP Paribas reported surging trading
revenues, lower than expected reserves
for bad loans, and set aside half its prof-

its for shareholder payouts. However,
Crédit Agricole said the coronavirus cri-
sis was “not resolved and with the sec-
ond lockdown period we have no clear
visibility at the end of the tunnel”.

The bank said its cost of risk stood at
€577m in the third quarter — 1.7 times
more than at the same point last
year but lower than in the previous
two quarters and below expectations.

Chief financial office Jérôme Grivet
also said it was too early to say if the sec-
ond lockdown in France would lead to
an “explosion in the cost of risk” next
quarter. Just over 70 per cent of the
increased provisioning in the third

quarter was for the risk of loans souring
“primarily related to prudent provision-
ing in sensitive sectors such as aviation,
hotels, tourism, restaurants and certain
professionals”, the bank said.

Despite being a smaller player in glo-
bal financial markets than many of its
rivals, Crédit Agricole still benefited
from the boost in trading revenues
enjoyed by peers. Its investment bank-
ing revenue was up 10 per cent in the
quarter, the bank said.

Chief executive Philippe Brassac said
he hoped for a return to “normality”
and that banks would be able to start
paying dividends again from next year.


Crédit Agricole warns of uncertainty

battery models, including its first dedi-
cated electric SUV, the ID.4.

The bigger concern for Mr Diess, how-
ever, is to ensure that an electric future
for VW is also a lucrative one. The dan-
ger is that electric cars, which contain
far fewer parts than combustion engine
models, will be commoditised. It is a sce-
nario Mr Diess hopes to combat by own-
ing the valuable customer data gener-
ated by vehicles that are ever more
automated and connected to the web.

Modern vehicles contain more lines of
code than a smartphone, but Volkswa-
gen relies on suppliers for 90 per cent of
its models’ software. Unlike rivals such
as Daimler, which has partnered with
Nvidia, VW is ploughing €7bn into
building a unit with 5,000 staff, tasked
with increasing the amount of proprie-
tary software in VW cars six-fold.

Yet competing with Silicon Valley
giants, whose cash reserves alone are
larger than VW’s entire market value, is
not straightforward.

“We have a chance because the car is
really complex and Google can’t do a car
today,” he said. “Elon [Musk] can make
a car, but also with some limitations
still. Can we get to his level? Yes, I think
so. Many of the people working for West
Coast tech companies are Europeans.”


Judith Evans — London

The world’s largest consumer goods
groups are making slow progress on
increasing the amount of recycled plas-
tic in their packaging, despite signing
up to a set of targets that aim for signifi-
cant progress by 2025.

Companies including Mars, Mondelez
and Keurig Dr Pepper all reported that
in 2019, less than 1 per cent of their plas-
tic packaging was made from materials
recycled from consumer use, despite
agreeing to 2025 targets ranging from 5
to 30 per cent.

The data was submitted by the com-
panies to the Ellen Macarthur Founda-
tion, which together with the United
Nations environment programme
brought together businesses responsi-
ble for more than a fifth of the plastic
packaging used globally to agree targets
for cutting waste.

Some consumer goods groups showed
better progress. Unilever increased its
use of recycled material from 1 per cent
in 2018 to 5 per cent a year later. Its ulti-
mate goal is 25 per cent. SC Johnson and
Danone also reported improvements.

But the foundation warned that many
companies taking part in the initiative

so far showed only piecemeal attempts
to rethink models dependent on single-
use plastics, and urged them to invest in
reuse, which in 2019 accounted for just
1.9 per cent of packaging, only fraction-
ally up from a year earlier.

Companies signed up to the New Plas-
tics Economy Global Commitment —
including retailers, consumer goods
makers and packaging producers —
increased their use of post-consumer
recycled plastic overall by 22 per cent
between 2018 and 2019.

Sander Defruyt, who leads the initia-
tive for the Ellen Macarthur Founda-
tion, said this was “real progress . . . we
were positively surprised on the recy-
cled content side”.

The rise was driven by retailers such
as Walmart, which increased the
amount of recycled plastic in its packag-
ing from 0.47 per cent to 9 per cent in the
year. Schwarz Group, which owns Lidl,
went from 0 to 6.1 per cent.

Among consumer goods groups, sev-
eral showed little change; Nestlé’s use of
recycled plastic was static at 2 per cent
and Reckitt Benckiser at 3 per cent. The
data does not include Procter & Gamble,
the world’s largest consumer goods
maker, which chose not to take part.

Overall, the companies reduced their
total plastic by only 0.1 per cent, a figure
that Mr Defruyt said demonstrated the
importance of working towards reduc-
tion as well as recycling.

“In order to meet the 2025 targets we
will need to see a significant accelera-
tion in progress,” he said. “Everything
elimination-related is mainly driven by
substitution to other materials rather
than really fundamentally redesigning
the system to reduce the need for pack-
aging in the first place.”


Slow progress
for consumer
goods groups
on recycling

‘In order to meet the
2025 targets we will need
to see a significant
acceleration in progress’

Contracts & Tenders

NOVEMBER 5 2020 Section:Companies Time: 4/11/2020 - 19:02 User: alistair.fraser Page Name: CONEWS2, Part,Page,Edition: USA, 11, 1

Page 19

Thursday 5 November 2020 ★ FINANCIAL TIMES 19

privacy, social media is undermining
democracy and a winner-take-all digital
economy is exacerbating income ine-
quality. Investors should brace for more
techlash (which matters, given that Big
Tech and communications accounts for
45 per cent of the S&P 500).

Then there is the fourth issue that
dominates headlines now: democracy.
Thankfully, a Gallup poll suggests
around two-thirds of Americans trust
the judiciary, a level broadly unchanged
in the last decade. But current events
might yet undermine that. And even
before the election sparked allegations
of voter fraud, disenfranchisement and
power grabs, only a third of voters told
Gallup they trust the legislative branch
— sharply down.

All this means the US has been sliding
towards what the US military calls
“Vuca”: volatility, uncertainty, com-
plexity and ambiguity. This week’s
events are a symptom of this, not a

So how should investors respond?
First, they should expect asset prices to
be volatile. Second, they should remem-

Covid-19, be that for households or
selected industries, such as coal. Mean-
while, the late 20th-century mantra of
shareholder capitalism is on the retreat
in the US and European business worlds.

That appals fans of Milton Friedman,
the economist who laid out this share-
holder mantra 50 years ago. However,
Friedman’s acolytes should remember
this: shareholder-first ideas were devel-
oped in the 1970s, when it was assumed
that businesses could rely on the US gov-
ernment to solve societal problems,
because the latter seemed competent.
This is no longer the case.

Innovation is also contentious. The
2008 crisis made unfettered creativity
in finance seem dangerous. This decade
has demonstrated the dark side of dig-
ital innovation: the internet is eroding

s the US voted on Tuesday, I
watched workmen board
up businesses in Manhat-
tan to protect buildings
from protesters. Some (the

offices of PwC) used plain wooden
boards; others (Givenchy) had stylish
barriers that projected their logo. One
(Theory clothing) even featured cheery
flowers on the wood.

All signalled three things: first, busi-
ness leaders know the political climate
is (sadly) creating profound new risks;
second, many are braced for this to last;
third, a few companies are putting a
brave face on it and trying to adapt.

Investors should learn from them.
Even if there is a clear outcome to the US
presidential election soon, this week’s
events are not an outlier — this is the cul-
mination of a zeitgeist shift that has
been building for a dozen years. Inves-
tors must recognise this, since it will not
be reversed whoever next sits in the
White House.

Think back to early 2007, just before
the financial crisis. It was taken for
granted by western business leaders
and financiers — or “Davos man” — that
globalisation, free-market capitalism,
innovation and democracy were

self-evidently good things that would
only spread and deepen.

No, that did not mean investors
accepted the “end of history” idea pio-
neered by historian Francis Fukuyama.
But there was an assumption that the
world was moving in one direction. That
fostered confidence to plan ahead with a
vision of time — and time horizons — as
consistent as Newtonian physics.

No longer. Since 2008, faith in all four
of those ideas has wilted. Globalisation
is the most obvious case in point. As an
annual metric compiled by DHL and
NYU Stern Business school shows, the
global integration of money and goods
has slowed, even though the movement
of people and information (via the
internet) has remained more robust.

And in the case of the US, the White
House is almost certainly set to keep
embracing America-first policies who-
ever wins. The only difference is that the
version of “patriotism” from the Demo-
crats’ Joe Biden would sound cuddlier
than Donald Trump’s, embracing global
climate change initiatives and promot-
ing a strategy of localisation tightly
enmeshed with pro-union policies.

Free-market capitalism is also in
retreat. That is partly because the US
Federal Reserve has unleashed so many
trillions of dollars of quantitative easing
that financial market signals are being
distorted. The divergence of equity
prices from the real economy this year is
one example of this.

But remember that even under Mr
Trump, politicians have been willing to
provide government aid during

Whoever wins,
investors face

new risks

Shareholders should learn
from corporate leaders
who are adapting to the
climate of uncertainty

here are many eye-popping
aspects to Ant Group’s plans
for a blockbuster public list-
ing in China this week, not
least its dramatic last-

minute suspension by the Shanghai
stock exchange. The saga shows both
how capitalist China has become and
how communist it remains.

One of the most astonishing things
about Ant is that it took just 16 years for
a payments app invented by the Alibaba
ecommerce platform to develop sepa-
rately into one of the world’s most
dynamic digital finance companies.
Ant’s indicative market valuation of
about $300bn had put it roughly on a
par with the venerable JPMorgan Chase.

Yet the latest episode has also shown
how even a billionaire businessman as

influential as Jack Ma, the founder of
Alibaba and Ant’s biggest shareholder,
remains subject to the dictates of the
Chinese Communist party. Chinese reg-
ulators do not appear to have taken
kindly to Mr Ma’s public comments last
month that red tape was stifling innova-
tion. This week they hauled him and his
top team in for “supervisory inter-
views” and halted Ant’s flotation.

It is far from clear how this latest high-
stakes face-off will play out and what
regulatory concessions will be wrung
out of Ant. The company said it would
also pause its listing in Hong Kong and
would refund money pledged by local
retail investors.

Standing back from the immediate
fray, it is worth considering what Ant’s
meteoric rise tells us about how busi-
nesses flourish in the digital age and
how they are still constrained by the
markets in which they operate. Here are
three lessons that we can perhaps learn
from its experience.

First, Ant provides an object lesson in
how to build a consumer-led, data-in-
fused digital business. Jeff Bezos, Ama-
zon’s founder, may have popularised the

that business and moved into lending,
investment and insurance, too. Most
western companies consider them-
selves either business-to-business or
business-to-consumer companies. But
as Ming Zeng, Alibaba’s chief strategy
officer, explains in his book Smart Busi-
ness, the Chinese internet giant operates
as a consumer-to-business company.
Network connections and intelligence
make it easier to anticipate and respond
rapidly to consumer demand.

Second, it is often easier to build
something new than repurpose some-
thing old. Part of the reason that China
leads the world in digital payments is
because it lacked many legacy institu-
tions. Rather than replicating what tra-
ditional banks had built, Ant antici-
pated what customers would want and
has built its business off a super app.

As Mr Ma says, Ant has built a techfin
company, with technology leading
finance, rather than a fintech company,
with the opposite priority. Ironically,
that may be one of the reasons why Ant
has incurred the wrath of regulators. It
may now have to act more like a bank,
keeping more loans on its balance sheet.

mantra: start with the user and work
backwards. But even he must admire
the way that first Alibaba, and then Ant,
have put that policy into practice.

When I visited Alibaba’s headquarters
in Hangzhou a few years ago, I heard
how the company created its own pay-
ments system in 2004 to solve a trust
issue between buyers and sellers on its
ecommerce platform. Alibaba spotted
an acute customer need and moved fast

to build a massive new financial busi-
ness. Ant spun out of Alibaba in 2011
and Alipay now has 711m active users.

Almost accidentally, by holding its
users’ money in escrow until its online
merchants had delivered their orders,
Alibaba created Yu’e Bao, now one of the
world’s biggest money market funds
with $173bn of assets. Ant expanded

All tech companies
need a political as well as
a social licence to operate
and it is folly to forget it



fter an economic and
public health shock, after
four years of exhausting
drama, after impeach-
ment, Americans have not

emphatically rejected either Donald
Trump or Trumpism. Even if he loses
the White House to Joe Biden, that will
be the central lesson of the US election
for a watching world, as much as for one
nation’s anxious liberals.

An unfancied president made short
work of Florida (the pollsters’ Water-
loo) and put paid to rash talk of a blue
Texas. At worst, Mr Trump will lose by a
respectable margin. He may yet prevail,
with or without the legal action he
trailed in a statement that was no less
grim for its predictability.

Naturally, a Biden win, even a slight

one, is a better outcome for liberalism
than Hillary Clinton’s loss in 2016. But
the absence of a landslide and a strongly
Democratic Senate will sting. Four years
ago, the party could cite excuses and
circumstances: an unpopular candi-
date, an opponent with no political
history to attack.

This time, they have no such solace.
Democrats nominated a seasoned and
unobjectionable moderate. They ran on
the fundamentals of public health and
prosperity. They amassed a Fort Knox of
campaign money. They had the encour-
aging precedent of the 2018 midterm
elections. Above all, they had Mr
Trump’s ethical and administrative
record to go after. All the raw materials
were there for a crushing victory that
would double as a purgative moment for
the republic: a clean-up of sorts.

Yes, a Californian running mate was
never ideal — the election hinges on the
Midwest and the south-east — but there
was no clear alternative to Kamala
Harris. As for his avoidance of mass
political rallies, Mr Biden could hardly
run as a slayer of the coronavirus
pandemic while holding them.

What is more, liberals cannot even
bank on demographic change to tilt
50-50 into 60-40 in their favour. Mr
Trump’s apparent gains among voters of
Latin American ancestry (in Florida, for
instance) are ominous for the left. A
more diverse nation is not axiomatically
a more progressive one. Liberalism will
have to fight for its future, not assume it.

The states of Wisconsin, Michigan
and Pennsylvania may yet turn for Mr
Biden. Arizona has gone from red to
blue without much of a transition phase,
just as Virginia did in 2008.

Yet even these achievements would
have struck liberals as the bare mini-
mum on the eve of the election. Nor do
they amount to any kind of national res-

A system in which neither party wins
or loses very badly — nor hangs on to
unified government for very long —
should be all the more peaceful. In
practice, this half-a-loaf politics merely
deprives whoever is president of
pan-national legitimacy.

Of course, even the narrowest win is
still potentially world-changing. It is no
more possible to be half-president than

At this point in the search for
unforced errors, the trail runs cold.
Liberals are left to accept a deeper fact
about the US. Far more than when the
phrase started doing the rounds a gener-
ation ago, this is a 50-50 nation, or

There is almost no politician good
enough to prise voters en masse from
the opposing half of the electorate — the

last to win more than 400 electoral
college votes was George H W Bush, in
1988. And there is almost no deed
or statement so bad as to cost a
politician many votes from their own
side. Whatever the pretensions of
Washington’s architecture, politics is
now better understood as a high-stakes
version of team sport than as the
discursive ideal of the ancients.

The president has lived
down to the Democrats’
direst expectations yet
remained competitive






ber that time horizons can change — and
are now shortening. Third, they should
note that it pays to embrace businesses
with a “just-in-case” mentality, rather
than the “just-in-time” philosophy that
dominated the expansion of global sup-
ply chains in previous decades.

Last, they must realise that the envi-
ronmental, social and governance
trend, and stakeholder mantra, will
remain whoever wins the election. That
is not because ESG is a tool of activism;
the key issue is that it is also a tool of risk
management. In a Vuca world it pays to
be resilient, and companies can only do
so if they track the “externalities” that
used to be excluded from economists’
models — such as income inequality or
climate change.

Or to put it another way, investors
should take a leaf from the book of those
Manhattan store owners: batten down
the hatches; accept that uncertainty will
last; embrace lateral vision, not tunnel
vision. Then adapt with some meta-
phorical flowers.

[email protected]

Ant’s rocky road holds lessons for business in a digital age

Ant’s IPO prospectus contains 60
pages of risk factors covering the Cov-
id-19 pandemic, the global economic
slowdown, US-China tensions, cyber
crime and regulatory risks. But, tellingly,
the first it highlights are whether Ant can
continue to maintain the trust of con-
sumers and innovate successfully. Regu-
latory limits on its ability to innovate
could seriously harm the business.

Third, all tech companies need a
political as well as a social licence to
operate and it is folly to forget it no mat-
ter how powerful they become. Regula-
tors in the US and Europe are now
sprinting to catch up with runaway tech
giants. China’s rulers have always kept
their internet platform companies
under far tighter control and have now
given Ant a further tug on the leash.

In creating such a successful com-
pany, Ant may have been built back to
front and upside down. Yet, in spite of its
impressive flexibility, it can never
wriggle out of China’s political strait-
jacket. Ant has now promised to
“embrace regulation”.

[email protected]

onald Trump called them
“bad hombres”, “drug deal-
ers, criminals and rapists”
in a stream of Latino insults
in his four years in office.

Yet his improved showing among
Latino voters, both men and women,
almost brought him Arizona, secured
Texas and, crucially, won him Florida,
so turning the election into a nail-biting
race. How did he do it?

That many Latinos reliably vote con-
servative is nothing new. The popula-
tion, now a larger ethnic group than
African Americans, has contributed
Republican voters ever since the “Lati-
nos con Eisenhower” movement began
in California in the 1950s.

Latinos, for all their diversity, share
certain cultural conservative traits,
such as the importance of family, lan-
guage, the Church and work. George W
Bush capitalised on that when he spoke
Spanish and emphasised issues like
faith in his 2000 election campaign.

Even so, to understand why Mr
Trump won more Latino voters in 2020
than in 2016 — boosting his national
share by 2 percentage points and by
15 points in Florida — review the Doral
rally he gave in late September.

To a Floridian audience of Cubans,
Nicaraguans and Venezuelans, all of
whom have fled socialist dictatorship,
Mr Trump emphasised a simple point:
the supposed socialist threat of “Castro-
Chavismo”. Taking aim at Joe Biden’s
role as vice-president, Mr Trump
pointed out he “met with [Venezuela’s]

Maduro,” prompting boos. Barack
Obama also “betrayed the Cuban people
and enriched the Castro regime.”

His message contrasted with Demo-
crats such as Alexandria Ocasio Cortez,
who embraces the “democratic social-
ist” label. It also resonated with exiles
seeking new lives in the US, on the bet-
ter side of Mr Trump’s “wall”. Mr Trump
made voting for him about “leaving the
crappy country you left behind [and]
buying into the false image of the busi-
ness mogul as capitalist salvation”, says
Michael Bustamante, a Florida Inter-
national University scholar. “The Biden
campaign never came up with an effec-
tive response to the ‘socialism’ charges.”

Racial attitudes may have been
another factor, especially as polls
suggest most Latinos identify as not-
coloured. In the wake of George Floyd’s
death, “conspiracy theories that linked
Black Lives Matter to a global commu-
nist vanguard provoked a particularly
virulent pro ‘law and order’ response”,
Mr Bustamante adds.

Clearly, these factors have less trac-
tion in other Latino communities with
different histories. In Florida, for exam-
ple, 47 per cent of Latinos voted Repub-
lican, according to exit polls, dropping
to just 21 per cent in California, where
most Latinos are Mexican.

Culture wars and socialism weren’t
the only reasons why Mr Trump won
Florida. He allied with a potent Republi-
can machine, built during the Ronald
Reagan years and led by Senator Marco
Rubio, who once opposed him. He ran a
better ground game with frequent ral-
lies and car caravans blasting blaring
pro-Trump tunes, with lyrics like, “Oh
my God, I’m going to vote for Trump”
from émigré band Los 3 de La Habana.

Indeed, his success in Miami — a city
hard hit by Covid-19, with some of the
nation’s highest Obamacare enrolment
rates, and a vulnerability to climate
change — is a wake-up call for Demo-
crats about their failure to attract new
Latino voters. “Democrats have never
found a way to speak to Cubans the way
Republicans do, joining them to a bigger
geopolitical battle,” said Guillermo
Grenier, another FIU scholar.

More existentially, Mr Trump’s suc-
cess raises the question of why Latino
émigrés vote for the same strongman
authoritarianism they once fled. My
conclusion, having grown up among
exiled Cubans and with my son born in
Venezuela, is that the US, in its political
division and gaping social inequality, is
becoming more Latin American too.

[email protected]

Trump first
insulted then

won over
Latino voters

Often culturally
conservative and allergic

to socialism, they were
not courted by Biden

half-pregnant. If elected, Mr Biden
could unwind much of Mr Trump’s
foreign policy, regardless of which party
controls the Senate. His election would
be toasted in Nato headquarters and the
chancelleries of most US allies. Execu-
tive power will also matter in the fight
against the pandemic. And even a
raising of the presidential tone is worth

No, if there is a sense of liberal dread
today, it is less about the scotched
dreams of a progressive realign-
ment than Mr Trump’s dismaying
resilience. For four years, he has lived
down to the Democrats’ direst
expectations and remained electorally
competitive. Not enough Americans
regard him as a tyrant or a klutz, or care
either way. Even if he loses, he has done
well enough to remain the Republicans’
reference point in opposition and a
plausible candidate in 2024.

And that is the best-case scenario for
the cause of liberalism. Vote-counting,
or a court ruling to stop it, may yet bring
about the very worst one.

[email protected]

Liberals should worry about the lack of a landslide


John Paul

NOVEMBER 5 2020 Section:Features Time: 4/11/2020 - 18:34 User: alistair.hayes Page Name: COMMENT USA, Part,Page,Edition: USA, 19, 1

Page 20

20 ★ FINANCIAL TIMES Thursday 5 November 2020

No 16,626 Set by NEO


1 Pipe down building placed in position

5 Report of girl deceived by a snake (8)
9 Rank ratings given by old music-maker

10 Duck pâté ingredient for celebrity chef

11 Drop round to grab length in material

12 One pulls out the stops roasting nuts (8)
14 Deal involving organ transplant? (4-8)
18 Dishonestly take position as head

waiter? (4,3,5)
22 Dish with wheat base is no meal for

cooking (8)
25 Work that caddie, nearby wheeling bags

26 Champion boxer possibly? (3,3)
27 Muddle keeps right one in complex

romantic situation (8)
28 Good coin and currency reduced in

splendour (8)
29 Certain prayers are unfinished in

optimistic environment (6)

2 Associate with tramp holding new book

3 Farewell horrendous lepidoptera —

none seen for ages? (6-3)
4 Having strayed, turn to her for direction

5 Dreaded meow as feline finally moves

6 Silver inscribed with second name

between (5)
7 One between legs — potential cause of

tears? (5)
8 Groom on time as horse moves (8)
13 Timber lifting in Noah’s Ark (3)
15 Sound cut in shout to encourage knight

16 Write number appearing within a small

range (9)
17 Aussie opening pair, having turned, run

one extra bye (2,6)
19 Call for Terence (3)
20 This could contribute to change in US

district (7)
21 Simple farmer one used to steer (6)
23 Perhaps return to university and study

Nash? (5)
24 One must extinguish second fire in room


Solution 16,625

The US presidential race might be too
close to call. But in the financial
markets a clear winner has emerged:
technology stocks.

The Nasdaq Composite was up
4.2 per cent in midday trading, easily
outpacing the 2.6 per cent rise of the
Dow Jones Industrial Average and
S&P 500’s 3.1 per cent gain. Big tech
powered the way. The five stocks that
have the greatest weight on the Nasdaq
— Apple, Microsoft, Amazon, Facebook
and Google-parent Alphabet — booked
gains between 4 and near-8 per cent.

Correlation does not imply
causation. Still, there is no shortage of
theories why investors think big tech is
still a good bet, despite the sector’s
stretched valuations.

Political gridlock tops the list. The
so-called blue wave, in which Joe Biden
becomes president and the Democrats
control the Senate and the House, now
looks highly unlikely. A divided
government in turn lessens the
likelihood of a capital gains tax rise,
which would have weighed on high
growth sectors such as tech.

On the regulatory front, regardless of
who wins the election, the tech sector
will remain under scrutiny. But a
gridlocked government could make it
harder to legislate to disrupt the
dominance of big tech companies.

Then there is the economy. The
ebbing of the blue wave sharply
reduces the likelihood of a big stimulus
plan to help the economy recover from
the pandemic. This puts pressure on
the Federal Reserve again. As if on cue,
the yield on the 10-year Treasury fell
0.13 percentage points to 0.76 per cent
— the most since March amid
expectations that interest rates will
stay lower for longer.

Faced with uncertainty, investors
have simply reverted to trading
existing trends. Big tech has proved it is
best placed to benefit from this. The
sector may be synonymous with
growth and risk-on trades. But
consistently solid profit growth and
rich balance sheets have also turned
these companies into haven plays.

US tech stocks:
all-weather endeavours

nicely, sharing a £15.9m profit pool,
with £3.8m the biggest payout.

Mr Odey is relinquishing his role
before his trial for alleged indecent
assault, to which he has pleaded not
guilty. He has not followed the example
of hedgies who pursued a lower profile
for other reasons. It is not uncommon
for fund managers to say they are
closing their funds to new investors or
that they will concentrate on managing
family wealth. Such actions typically
follow periods of poor performance
accompanied by sharply shrinking
assets under management.

Mr Odey’s limited retreat reduces the
exposure of his business and its
co-owners to any future bad publicity
future. It covers a number of potential
outcomes, as the strategies of hedge
fund managers tend to.

Mr Odey donated to the Conservative
party and the leadership campaign of
Brexiter Boris Johnson, who is now
prime minister. Resulting conspiracy
theories appeared wide of the mark. As
a money manager, Mr Odey went both
long and short on sterling, an asset
sensitive to Brexit politics.

Investors have had more reason to
gripe. Take Mr Odey’s long/short
European fund, which has made gains in
only one of the past six years. Until the
end of September, it was down 21 per
cent compared with a near 3 per cent
increase from the HFRI 500 equity
hedge index of HFR, a data group.

Management fees last year were half
those garnered in 2015 at Odey Asset
Management LLP, according to filings.
Performance fees of under £12m were
closer to a sixth. The partners still did

China has now undergone two years of
political fallout with the US. Its
markets have emerged stronger.

Crispin Odey’s partial retreat from his
eponymous asset management firm
may mark the end of an era. He is
stepping down as co-chief executive
ahead of a trial but will continue to
manage funds. As a pioneering force in
the UK hedge fund industry, he has
attracted criticism as well as praise
from politicians and investors.

Jeremy Corbyn, former leader of the
Labour party, listed the fund manager
among five elitists he wanted to target.

Odey Asset Management:
one foot out the door

The Chinese renminbi has been a hot
bet for investors taking a position on
the US election. A historic rally in the
currency has boosted its value against
the US dollar by more than 7 per cent
from May lows. A swift unwind is now
on the cards.

A Joe Biden presidency was priced in.
The thesis is that, if elected, Mr Biden
would be much less hawkish on trade
relations with China, reducing tariff
pressures on exports. These have been
recovering anyway, fuelling a large
trade surplus that has also boosted the
currency. Foreign investors have driven
the rally. There has been a surge in
trading volumes in the offshore
renminbi market. Offshore funds have
then poured into China’s equity
markets, helping to push their value to
a record of more than $10tn this year.

With the election result hanging in
the balance, renminbi bulls could find
themselves as confounded as blue
wave-backing pollsters. The currency
spiked then slumped, according to
Refinitiv data, with the publication of
voting results that showed a surge in
support for Donald Trump.

Worsening trade hostilities would
hurt US companies as well as Chinese
counterparts. The latter group would,
however, receive some compensation
via an unwind in the currency trade.

A limiting factor is the Chinese
central bank’s greater leeway on setting
exchange rates. Last year, a weak yuan
would have meant hefty capital
outflows from nervous foreign
investors. The pandemic has turned
the tables. China’s strong economic
recovery, cheap government bonds and
a growing tech industry have made the
currency less prone to sentiment-
driven swings.

A stable outlook for Chinese equities,
which should stay mostly unaffected
by US election results, helps too. The
outbreak of the trade war in 2018 was
marked by a 30 per cent drop in the
country’s benchmark CSI 300 index.

Biden vs Trump:
yuan direction

The 2020 US election has failed to
deliver the predicted “blue wave” that
would have given Democrats a
sweeping majority for both the
presidency and Congress. As officials
pored over ballots in key states such as
Wisconsin, Michigan and Pennsylvania
yesterday, another four years of
economic lethargy was becoming
inevitable. A correction in stocks and
high-yield bonds is due.

American presidents are limited to
two terms. Durational statutes do not
apply to an enfeebled economy. Since
the 2008 global financial crisis, the US
economy has been mired in anaemic
growth tempered by rising asset prices.

US growth fell 32 per cent at an
annualised rate in the second quarter
of the year as the pandemic took hold.

The Federal Reserve may finally be
out of bullets. Assets prices, notably
stocks, have been resilient on high
demand. Broadly-based profits growth
has primarily been a feature of a tech
sector bolstered by lockdowns.

One way to understand the weakness
in aggregate economic demand is to
scrutinise real interest rates. The
10-year inflation-protected US
Treasury in 2006 traded at a yield of
2-3 per cent. Since 2010, its yield has
mostly been below 1 per cent, including
a stint in negative territory in 2012 and
again in 2020.

Meagre interest rates and cheap, low-
risk funds have forced asset prices
upwards. The ICE BofA triple B bond
spread is currently under 2 per cent.

Absolute returns look even scantier
measured by a 10-year Treasury yield
below 1 per cent. Companies whose
revenues have plummeted — cruise
lines, airlines, cinemas — have been
able to borrow money easily so far in
2020 to survive. Investors have had
few higher-yield options.

With Congress divided, legislators
will struggle to deliver a follow-up
stimulus to March’s $2.2tn Cares Act.
S&P recently forecast that the default
rate on leveraged loans would reach 8
per cent by the summer of 2021 after
being in the low single digits for much
of the 2010s. Marginal companies are
increasingly vulnerable to collapse.

Even in a world of secular
“stagnation”, an economy still
grudgingly grows. The US is instead

US assets/election:
blue wave goodbye

facing a deep recession with little
political consensus about a remedy.

The S&P 500 index is up 4 per cent
in 2020 and credit securities are still
tightly priced. That contradiction
cannot last forever.

Lex on the web
For notes on today’s breaking
stories go to

Twitter: @FTLex

The future of tax credits for
renewable energy projects, especially
wind farms, is a debate that goes
round and round US Congress. US
Production Tax Credits matter to
Danish turbine maker Vestas. The US
generates nearly a third of its
revenues and deliveries. President
Donald Trump, no fan of wind power,
might want to remove the benefit if
he returns to office for another term.
Yet even that will not halt the
momentum of US wind power.

Vestas has other issues to deal with.
Third-quarter results missed targets
in an important way. Orders of
4,232MW — worth €3.1bn — fell
11 per cent. That leaves the backlog
at €14.6bn, down more than a tenth
from the same period last year.

Vestas produced revenues and
operating profits significantly above
expectations, but the turbine maker
did not increase its earnings outlook
for the year. That is a problem when
the market is pricing in plenty of
growth. Vestas trades on an enterprise
value 15 times forward ebitda, double
the decade average, although that is
still cheaper than rival Siemens
Gamesa. Any threat to earnings causes
wobbles in the share price, which fell
more than a tenth yesterday morning
before recovering smartly.

The Trumpian part of the wobble —
the threat to tax credits — looks
overplayed. The scheme has been
regularly extended over the years.
Further extensions are possible. Earlier
this year, requests were approved from

three Republican Senators for
projects in their states.

Even if it is not extended, there is
hope for wind. Many of America’s
wind farms are onshore. Growth for
all turbine makers will probably
come from offshore projects. In
capacity terms these will expand by
well over six times to 20GW in the
next decade, according to the US
Department of Energy. These marine
power plants do not depend on the
tax credit scheme. Vestas, which has
nearly 14 per cent of the offshore
turbine market, stands to gain.

The shares look expensive, but the
expansion of offshore wind power
suggests investors should maintain a
breezy attitude towards the

FT graphic Source: Refinitiv

Wind power stocks are flying
Total returns (rebased)






20192018 2020

Orsted Vestas Siemens Gamesa

Turbine-maker valuations are sky high too

The US market matters to Vestas

Enterprise value to forward ebitda

Percentage of megawatts delivered in 2019







Siemens Gamesa

Source: S&P Capital IQ

Source: Vestas


Rest of the world


Vestas: goin’ with the wind
Wind power stocks have soared since March, as ESG funds tighten their focus on renewable energy. Vestas
now has a premium valuation, even if it is cheaper than rival Siemens Gamesa. The turbine maker has long
had a strong position in the US and should benefit from growth in America’s offshore wind market.

NOVEMBER 5 2020 Section:FrontBack Time: 4/11/2020 - 18:49 User: andy.puttnam Page Name: 1BACK, Part,Page,Edition: USA, 20, 1

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