Daily Brief: Europeans Canceled Their Plans In January, But At Least It Might Give The ECB Something To Do

Daily Brief: Europeans Canceled Their Plans In January, But At Least It Might Give The ECB Something To Do

about 2 years ago3 mins

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Data out on Monday showed European business activity climbed at its slowest pace in almost a year this month, as the region’s socialites sit tight till this whole Omicron thing blows over.

What does this mean?

European governments have been going out of their way to keep the recent wave of Covid cases under control, which could’ve spelled trouble for their manufacturing sectors in January. But the region’s latest business activity survey – which asks companies how busy they’ve been that month – showed factories weren’t affected all that much by new restrictions. Quite the opposite: manufacturing activity actually hit a five-month high on the back of easing supply shortages. Trouble is, restrictions are still a nightmare for hospitality and other consumer-facing sectors, with activity in services businesses dropping to a nine-month low. And that much bad was enough to outweigh any good: overall business activity fell to its lowest level since last February.

EU activity

Why should I care?

Zooming in: Will the ECB be forced to act?

Business might be slowing down, but prices are only going up as companies pass their higher costs onto customers. In fact, the average price businesses were charging for goods and services in January rose at its fastest pace on record. And since that might push record inflation even higher, some economists are starting to think the European Central Bank – which has previously said that it won’t raise interest rates this year – might be forced to do exactly that.

The bigger picture: Europe’s over Covid.

This manufacturing data is in keeping with other analysis over the weekend, which showed that Omicron’s causing a lot less damage to the economy than previous variants did – mostly thanks to high vaccination rates. Case in point: there were around twice as many visits to shops, bars, and restaurants this month as there were last January, even though this month’s infection rates make last year’s look like small potatoes.

Omicron damage

Keep reading for our next story...

Activist Investor Trian Has A Stake In Unilever – And It Might Use It To Break Up The Company

Unilever image

News broke on Monday that Trian has been building up a stake in Unilever, and the activist investor is licking its lips at the prospect of breaking up the Ben & Jerry’s maker…

What does this mean?

Unilever’s been feeling the pressure to rethink its strategy for a while now, and last week’s failed bid for GlaxoSmithKline’s consumer health business only compounded investors’ worries. So Trian’s ready to show its hand: the activist investor – which buys a big enough stake in companies so it can bring about change from the inside – has reportedly been hoarding Unilever’s shares over the past few months. Analysts reckon it’ll use its substantial position to push the company into separating its lagging food segment from its much more successful household and personal care segment. That, Trian might be hoping, would give Unilever a much more streamlined focus, and hopefully drive up its share price.

Unilever stock
Source: Google Finance

Why should I care?

For markets: Trian’s been there, done that.

Investors sent Unilever’s stock up 7% on the news, which could be for a couple of reasons. For one thing, Trian’s got pedigree with consumer staples: the firm helped boost Procter & Gamble’s stock by 67% between 2017 and 2021. And for another, Unilever’s already in an enviable spot right now: it sells everyday essentials, which means it can pass higher costs onto its customers without losing them. Any improvements Trian brings to the table, then, are the icing on the cake.

The bigger picture: Activists are cornering Peloton too.

Activist investors are out in full force right now, with Blackwells Capital reportedly pressuring exercise equipment company Peloton to think about selling itself to Apple, Disney, or Nike. The company’s losing customers hand over fist as gyms reopen, after all, and its shares are languishing over 80% below their all-time highs. If the right buyer came along, though, it’d offer a premium on Peloton’s share price, which would go some way to offsetting its shareholders’ losses.

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