A swift change of CEO at Sky TV, plus New Zealand backs Australia over doctored Chinese photo

A2 Milk and Synlait shares fall as China/Australia tensions escalate
Retail sales spending now higher than last year
US Fed describes recovery as ‘extremely uncertain’
Americans in need will have to continue to wait for stimulus payments

Just as the outlook was beginning to improve for Sky Network Television, the company dropped yet another bombshell on investors yesterday announcing the unexpected resignation of CEO Martin Stewart after less than two years in the job.

The announcement is yet another frustrating setback for long suffering shareholders and the latest chapter in an ongoing saga of missteps that has seen the company constantly on the backfoot in recent years, all of which is reflected in a share price that continues to languish at around 16c, down 66 percent year to date.

Stewart took over as CEO in February 2019 after Sky had failed to adapt to a rapidly evolving digital environment that had seen customers leaving in droves, ditching the pay television broadcaster in favour of cheaper on-demand services such as Netflix.

Stewart brought with him a strong track record of experience in pay television with previous roles at BskyB in the UK and OSN in Dubai. He has also been responsible for rebuilding an entirely new strategy for Sky based on growing streaming services and new technology opportunities for customers to participate in.

Chief commercial officer Sophie Moloney will take over as CEO, effective immediately. The company said Stewart would be available for the next three months to provide support for the transition.

Moloney joined Sky in 2018 as general counsel before taking on expanded executive roles, and had previously worked abroad at Sky UK, Sky News Arabia, Abu Dhabi Media, and OSN.

Chair Philip Bowman said the board respected Stewart’s decision to return home to Europe and reached a mutual agreement to enable his departure.

Bowman said when Stewart joined the company there has been an understanding he’d be able to travel back to Europe regularly, however due to border closures that hadn’t been possible and as a result he had decided to return home.

In his short time in the role Stewart had been responsible for imposing a flatter, leaner management structure that saw many previous long-standing staff under former CEO John Fellet moved on.

However, with a business strategy that is only in the early stages of implementation investors will be hoping this latest management transition can be completed as quickly and as smoothly as possible.

Sky shares closed down 3.6 percent at 16.2 cents having traded as low as 15.7c earlier in the day.

A2 Milk and Synlait shares fall as China / Australia tensions escalate

The government has found itself drawn into an escalating war of words between China and Australia that is making shareholders in businesses such as A2 Milk and Synlait, which have a significant trading relationship with China, increasingly nervous.

Shares in both companies fell 3.7 percent and 1.7 percent respectively yesterday as shareholders took fright that New Zealand could end up unwittingly caught up in the dispute.

The dispute is being seen as the first big test for recently appointed Foreign Minister Nanaia Mahuta as foreign policy officials tread carefully in their response to the tensions while not wanting to be seen taking sides.

As reported yesterday, an image published in Chinese state media depicting an Australian soldier cutting the throat of an Afghan child, in a reference to last week’s findings that elite Australian troops committed war crimes in Afghanistan is at the centre of the latest escalation in tensions.

Australian Prime Minister Scott Morrison said China should be “utterly ashamed” at its actions while a Chinese state newspaper today described Australia as engaging in “wolf-style policy” and being “the most savage accomplice of US oppression of China.”

The exchange comes just days after China accused Australia of dumping wine in its market and imposed punitive tariffs in excess of 200 percent in the latest round of what has become an escalating trade war.

Diplomatic observers believe China has chosen to make an example of Australia in order to demonstrate to other countries the risks they run if they push too hard on issues including human rights abuses, questioning the recent crackdown in Hong Kong, China’s long standing occupation of Tibet or limits being placed on the use of equipment made by Chinese telecommunications companies such as Huawei in global 5G networks.

Prime Minister Jacina Ardern chose her words carefully, sticking to the issue at hand when responding to the latest series of developments, given New Zealand’s close trading relationship with both countries.

“Our concern over the use of that image was that it was an unfactual post and of course that would concern us, that’s something that we’ve raised directly in the way that New Zealand does when we have such concerns,” she said.

Ardern didn’t elaborate on what she told China or what the response was.

Foreign Affairs Minister Nanaia Mahuta said NZ does not support “disinformation online that has the potential to be inflammatory” and will look to promote dialogue as it hosts the Asia-Pacific Economic Cooperation 2021 forum.

Retail sales spending now higher than last year

The latest Retail NZ Sales Index shows that spending through November remained strong, and that total spending since March has is now ahead of last year.

Greg Harford, Retail NZ chief executive said that the index was around 25.7 per cent higher in November than last year, and that total spending since March is now 3.4 per cent higher than for the same nine months last year.

“This is good news after a year of turmoil on the back of Covid-19. The strong overall result reflects increased consumer confidence, the fact that Kiwis are staying at home and not travelling overseas, and low interest rates which may be encouraging spending.”

However, Harford said performance is uneven across the sector and, while many businesses are performing well, a significant number of individual businesses are continuing to see their revenues lag well behind last year.

“The Singles Day, Black Friday and Cyber Monday shopping festivals will have contributed to the strong November result, and retailers will be hoping that consumer confidence remains strong in the run-up to Christmas.”

Key challenges facing the sector include managing supply chains with many retailers facing stock shortages due to freight delays as well as the risk that businesses could be ordered closed if there were to be a further outbreak of Covid-19.

US Federal Reserve describes recovery as “extremely uncertain”

While US sharemarkets have displayed plenty of optimism in recent weeks, having just completed one of the best months this year, the country’s central bank is becoming increasingly wary about the country’s economic outlook.

Federal Reserve Chairman Jerome Powell described the outlook for the United States economy as “extraordinarily uncertain” as the rise in Covid-19 cases continues to take an economic toll on the country.

“As we have emphasized throughout the pandemic, the outlook for the economy will depend, in large part, on the success of efforts to keep the virus in check” Powell said in prepared remarks ahead of his Testimony before the US Senate Committee on Banking, Housing, and Urban Affairs.

Powell said the rise in new Covid-19 cases, both here and abroad, is concerning and could prove challenging in the next few months, adding that a full economic recovery is “unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

Powell’s remarks echo comments he made earlier this month. At a virtual panel discussion at the European Central Bank’s Forum on Central Banking, Powell emphasized the economy’s recovery but noted that the economy that we knew before the coronavirus pandemic might be over.

But recent news of promising vaccines has Powell “more positive” for the medium term, though he expects “significant challenges and uncertainties including timing, production and distribution, and efficacy across different groups.”

“It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence,” he said.

Meanwhile, several programs employed by the Fed in March are set to expire at the end of the year. Powell said these programs help “unlock almost $2 trillion of funding.”

Bottom of Form

Americans in need will have to continue to wait for stimulus payments

Even with coronavirus spiking and new restrictions taking effect, there seems little chance that Americans desperately in need will see any further support this side of Christmas.

While there’s broad support from both Republicans and Democrats for sending out another round of payments, lawmakers have been unable to come to any agreement on a broader economic aid package.

Congress returns to Washington this week focused on passing a broader spending bill by December 11 to avert a partial government shutdown, though it’s possible that some relief programs could be added to such a broader spending bill.

If anything, those provisions may extend programs set to expire on December 31 — including expanded unemployment benefits, an eviction moratorium and a pause on student loan payments.

There’s been little talk from lawmakers of a second round of stimulus checks since the summer. The most recent stimulus package proposal put forth by Republicans, who currently control the Senate, didn’t include money for direct payments.

President-elect Joe Biden supports a $3 trillion Democratic-backed bill that passed the House in May, which provided for a second round of checks. But that package has little chance of passing Congress unless Democrats gain control of the Senate by winning both runoff Senate races in Georgia set for January 5.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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