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Stocks, dollar and China Caixin PMI in focus

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In currencies, the dollar index, which tracks the greenback against a basket of six currencies, firmed to trade at 90.671 by 6:49 a.m. HK/SIN, earlier touching a five-week high in the overnight session.

The dollar had firmed after new Federal Reserve Chairman Jerome Powell gave a positive assessment of the U.S. economy on Tuesday and signaled interest rates could rise more than three times this year.

Gains in the dollar index also came as the euro slid ahead of elections in Italy at the weekend. The currency last traded at $1.2190.

Against the yen, however, the dollar slipped to trade at 106.64, compared to levels around the 107 handle seen at the end of Asian trade in the last session.

On the energy front, U.S. West Texas Intermediate tumbled 2.17 percent to settle at $61.64 per barrel and Brent crude futures for May deliveries fell 2.7 percent to settle at $64.73. The drop in prices came after data reflected an increase in U.S. stockpiles.

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EU suggests AstraZeneca diverts Covid-19 vaccines from UK

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An AstraZeneca vaccine production line.

Bloomberg | Bloomberg | Getty Images

The European Union has suggested that drugmaker AstraZeneca divert supplies of its coronavirus vaccine from the U.K. to mainland Europe, as a battle over production delays and supply continues.

It comes after AstraZeneca told the EU last week that it would initially deliver far fewer doses of its Covid vaccine to the 27-member bloc than originally thought.

The EU demanded on Wednesday that the pharmaceutical giant fulfil its agreement to supply it with coronavirus vaccines, by whatever means necessary.

Health Commissioner Stella Kyriakides said talks with the company, which continued Wednesday, had been “constructive.” But she also tweeted that “contractual obligations must be met, vaccines must be delivered to EU citizens.”

She said in a statement that the EU had rejected the “logic of first come first served,” after AstraZeneca’s CEO blamed supply delays on teething issues at its European manufacturing sites, and said similar issues in the U.K. had been ironed out because it had ordered its vaccine dose three months earlier than the EU.

In a press briefing, Kyriakides said there was “no hierarchy” in the production plants named in its advance purchase agreement with AstraZeneca, and no stipulation on which ones would or wouldn’t supply the EU.

“In the contract there are four factories listed but it does not differentiate between the U.K. and Europe. The U.K. factories are part of our advance purchase agreement and this is why they have to deliver,” she said. There was no clause in the contract stating that the drugmaker would prioritize the U.K., she added.

Battle brewing

It marks the latest development in the very public argument between the EU and AstraZeneca, as the latter confronts problems at two of its European plants.

The British-Swedish company’s CEO Pascal Soriot stoked tensions further on Tuesday when he said in an interview with Italy’s La Repubblica newspaper that its agreement with the EU was a “best effort” one and not a “contractual commitment.”

The EU hit back, demanding that the drugmaker present detailed plans over its delivery schedule. One official explicitly asked AstraZeneca to divert doses made in the U.K. to the EU, although the company did not respond to this issue, according to a Reuters report.

In the Tuesday interview Soriot said: “The U.K. government said the supply coming out of the U.K. supply chain would go to the U.K. first. Basically, that’s how it is. In the EU agreement it is mentioned that the manufacturing sites in the U.K. were an option for Europe, but only later.”

British Prime Minister Boris Johnson did not comment directly on the matter Wednesday, but said: “We’re very confident in our supplies, we’re very confident in our contracts, and we’re going ahead on that basis.”

Vaccination drives

The EU is struggling to get its vaccination drive into gear as it lacks supplies. It was first dealt a blow by vaccine maker Pfizer-BioNTech, which announced that it had to temporarily lower production in order to upgrade its manufacturing capacity in Belgium. This was then followed by AstraZeneca last Friday reducing its delivery estimates for the region.

One unnamed senior EU official told Reuters that the bloc expected about 80 million doses by March, but had been told it would receive only 31 million doses instead. The company has not confirmed the quantities involved.

The European Medicines Agency is expected to approve the AstraZeneca vaccine for use on Friday.

The U.K. ordered 100 million doses of the AstraZeneca vaccine last May, making it the first country to do so. It is heavily reliant on the vaccine for its immunization drive, which has sprinted ahead of those in continental Europe, having begun in early December. The EU began its rollout on Dec. 27; it originally ordered 300 million doses of the AstraZeneca vaccine in August.

So far, the U.K. has vaccinated over 7.1 million people with a first vaccine dose, and almost half a million have received their second dose, meaning it has carried out more immunizations than German, France, Italy and Spain combined, according to Our World In Data figures.

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10,000 stores set to close in 2021, Covid keeps pummeling retailers

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A man passes by a Banana Republic store, which is going out of business, in New York, January 10, 2021.

Scott Mlyn | CNBC

One retail research and advisory group is forecasting there could be as many as 10,000 store closures announced by retailers in the United States this year, which would set a new record, as the Covid pandemic continues to take a toll on the industry and companies rethink how many locations they’re able to keep open.

10,000 closures would represent a 14% uptick from 2020 levels, Coresight Research said in a report released Thursday. Coresight is also forecasting retailers will announce 4,000 store openings in 2021, driven by growth from grocery discounters and dollar store chains.

Last year, in the thick of the pandemic, Coresight predicted in the June that there were going to be as many as 25,000 closures announced by retailers in 2020. But it ended up tracking just 8,741, along with 3,304 openings. That was a deceleration from the 9,832 closures it tracked in 2019 — the highest number Coresight has seen as long as it has been following retail closings and openings.

The reason for the large gap between the final tally and its initial prediction, Coresight said, was because some companies have been “holding out for an upturn in store-based sales.” Many retailers have also been able to buy more time by reducing their rents and striking deals with their landlords to be able to stay open a little longer, it said.

“In 2021, the rollout of [Covid] vaccination programs should result in a partial recovery in store-based sales,” Coresight CEO and Founder Deborah Weinswig said. “However, these programs may take many months to reach a wide base of consumers.”

Some companies won’t be able to wait much longer, Weinswig said, especially those that didn’t have the holiday season they were hoping for. Consumers are going to continue to spend more of their money online, which is another reason for the heightened store closure forecast this year, she said.

As of Jan. 22, Coresight said retailers in the U.S. have already announced 1,678 closures, which include ones by Bed Bath & Beyond, Macy’s and J.C. Penney.

Weinswig also pointed to a pattern that took shape in the retail industry after the Great Recession, which could repeat itself this year.

“Although retail was significantly impacted in 2008 and 2009, the repercussions in terms of retail bankruptcies peaked in 2010,” she said. “We could see history repeat itself in 2021, resulting in greater numbers of store closures this year than we saw in 2020.”

Coresight said apparel retailers, including Ascena Retail Group and The Children’s Place, accounted for 36% of all store closures in 2020, tallying more than 3,000. The apparel category will likely make up a substantial portion of closures this year, too, it said.

A study released earlier this week by First Insight found 40% of consumers plan to shop for apparel in brick-and-mortar stores either the same amount or less after being vaccinated, implying there won’t be an immediate rush back to the mall.

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Hong Kong leader Carrie Lam on relations with U.S., potential second term

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Hong Kong leader Carrie Lam told CNBC on Thursday that she’s “optimistic” the new U.S. administration under President Joe Biden will give her government “a fair hearing” with regard to the city’s controversial national security law.

The law was imposed in Hong Kong last year by the Chinese central government in Beijing — bypassing the city’s lawmakers. The Trump administration criticized the move, which became one of the issues at the center of worsening U.S.-China ties.

Lam, however, denied that Hong Kong is a sticking point between the two economic powers. Instead, she said the U.S. sometimes used the city as a “pawn” in its dealings with China.

“As far as we’re concerned, yes, we’re going through a very tough period where Hong Kong is often put on the global radar screen,” Lam told CNBC’s Emily Tan. She acknowledged there are a “couple of laws made by the U.S. Congress and the president’s executive order, which do affect Hong Kong’s business and individuals — of course, including myself.”

“But I remain optimistic that with the new U.S. administration, I hope that they will give us a fair hearing as far as the national security law is concerned,” she added.

Following the implementation of the law, the Trump administration sanctioned 11 individuals — including Lam — for “undermining Hong Kong’s autonomy” and rolled back the city’s special status under American law that treated it differently from other Chinese cities.  

Hong Kong is a former British colony that was returned to Chinese rule in 1997. The city is governed under the “one country, two systems” principle and is given greater autonomy than other Chinese cities.

Lam said her government has gone to the World Trade Organization to dispute the U.S. removal of Hong Kong’s special status — but their request for a dispute settlement has been blocked by Washington.

“We always love to have what we used to have,” she said. “What we used to have, actually, should be with us but unfortunately on this front, the signal is not very positive.”

A second term?

The Hong Kong economy has been battling multiple crises over the past years, including the U.S.-China trade war that intensified in 2018, months of pro-democracy protests in 2019 and the ongoing coronavirus pandemic.

Latest available economic data showed that Hong Kong’s economy has contracted for five consecutive quarters on a year-on-year basis as of the third quarter of 2020.

The city is expected to release fourth-quarter GDP data on Friday, and official forecast is for the economy to shrink by 6.1% for the whole of last year — among the worst performance in Asia.

Lam told CNBC she hopes to see “some encouraging growth” in 2021, unless the pandemic worsens despite restrictions and vaccination.

She added that a vaccination program would be rolled out in Hong Kong next month.

The number of Covid vaccine doses the government has committed to buy is about three times Hong Kong’s population of 7.5 million, she said.

Hong Kong has been recording an increase in Covid-19 infections in recent weeks.

The city recorded more than 10,300 in cumulative cases and 176 deaths as of Thursday, according to government data. The numbers are lower than many countries and territories globally, but its economy can ill-afford further threats that dampen activity.

Lam, who took over as the city’s leader in 2017, has had a difficult tenure plugged by both political and economic challenges.  

Asked if she would seek reelection when her term ends next year, she declined to answer but said: “I just try to comfort myself that very often, women are being left to do the most difficult job. And I happen to be one of them.”

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