Jaws

“We’re gonna need a bigger boat” a classic line delivered by Roy Scheider in the 1975 film ‘Jaws’.

Well, we’re now going to need a bigger shark!

Squalene -traditionally sourced from shark liver oil has been used in a wide range of cosmetic and personal care applications, including skin care creams and coloured cosmetics due to its anti-ageing and moisturising properties. However, more countries have placed new restrictions on shark fishing while global cosmetics companies have sought to develop alternative vegetable sourced squalene from things like yeast, wheat germ, sugar cane and olive oil.

Unfortunately for sharks, squalene is an ingredient in several Covid-19 vaccine candidates as it is believed to create a stronger immune response. Glaxo SmithKline is reported to use shark squalene in its flu vaccines for nearly 20 years.

Around 3,000 sharks are needed to extract one tonne of squalene. Conservationists estimate that some 3million sharks are already killed every year for squalene. Shark Allies, a California-based conservation group estimates that if the world’s population received one dose of a Covid-19 vaccine containing squalene that around 250,000 sharks would need to be killed.

ESG sustainable investing has become one of the fastest growing sectors of financial services. So where do we draw the line on what is and what is not acceptable? If these media reports are true, does mankind come first? We might have a natural fear of sharks but they are a key part of the natural food chain in the world oceans. Sharks have also been around a lot longer than humans with fossils dating back almost 450million years. Sir David Attenborough and Greta Thunberg have already highlighted the risk to our oceans from plastic and global warming, so what will they think about this threat to the balance of life in the oceans from a potential Covid-19 vaccine ingredient?

What have been watching?

Rising Covid-19 cases, an unbelievable US presidential TV debate, PM Boris Johnson ‘losing the plot’ on regional lockdown rules and President Trump testing positive for Covid-19. However, the confusing updates regarding President Trump’s health over the weekend do not appear to have dented investor risk appetite.

The number of Covid-19 cases continues to grow but markets have not been unnerved so far despite the re-imposition of more regional lockdowns. Could this be because the true scale of the Covid-19 outbreak in March in Europe was much worse? Mass testing for the deadly virus is far more advanced than earlier in the outbreak, meaning its genuine spread was never really known. The Economist has compiled data from 27 EU countries and estimates that 3million caught the virus in one week in Spring compared to around 300,000 new cases a week currently. In addition, the survival rate is higher too. The Pharma companies are also closer to developing a vaccine with four now in phase III trials. However, Europe does appear to be in a second wave, with both Madrid and Paris facing tougher lockdown restrictions. Meanwhile, in the UK a ‘technical glitch’ has meant almost 16,000 cases have gone unreported and adds to the challenge of monitoring the success of local lockdowns.

The ongoing technology struggle between the US and China continues. Reuters reported that China is preparing to launch an anti-trust probe into Alphabet Inc’s Google, looking into allegations it has leveraged the dominance of its Android mobile operating system to stifle competition. The case was proposed by China’s Huawei Technologies.

Sterling edged above $1.29 on hopes for some progress in Brexit negotiations. However, the EU has begun legal proceedings against the UK after it refused to remove sections of the Internal Markets Bill. Despite the burst of optimism about a UK-EU trade deal, this has yet to be supported by any concrete signs of progress. It was also reported that the UK no longer regards the October 15^th EU Council Meeting as the date by which agreement on a deal must be secured. Both sides are still talking but it appears as if any trade deal is going to go right to the very last minute.

The Bank of England’s (BoE) internal debate about the merits of negative interest rate policy is underway and so far, there is not much sign of a consensus. One MPC member said they had seen encouraging evidence of the effectiveness of negative interest rates, specifically that they have helped to reduce effective borrowing costs without further impairing the profitability of lenders. However, the Deputy Governor of the BoE said he believed the effective lower bound for UK interest rates is 0.1% and believes much more work remains to do before negative interest rates are even considered. Meanwhile, Andy Haldane, Chief Economist of the BoE speaking at an economic summit, accentuated the positive elements of the UK’s recent performance and warned against the potentially damaging behavioural implications of relentlessly negative reporting.

UK house prices rose by 5% in September compared with a year ago, according to the Nationwide reflecting post lockdown pent-up demand and temporary stamp duty holiday. However, it also highlighted the difficulty in securing a mortgage by first-time buyers as lenders take a safety-first approach to avoid defaults.

In Europe, the European Central Bank (ECB) may follow the US Federal Reserve in adopting flexible inflation targeting. ECB President Christine Lagarde suggested it might be under consideration along with a review of timescale.

In the US, President Donald Trump and his challenger Joe Biden clashed fiercely in one of the most chaotic and rancorous White House debates in years. Then President Trump tested positive for Covid-19 although there then followed a series of confusing updates as he was reported to be receiving a ‘cocktail’ of Covid-19 treatments. This creates considerable uncertainty about Trump’s election campaign. So far, there is little sign of Joe Biden’s opinion poll lead narrowing. Meanwhile, the Democrats unveiled a $2.2 trillion relief bill although this is scaled back from their previous plan by $1 trillion.

In Japan, service sector activity improved marginally in September but remained in contraction territory as some lockdown measures remain.

China’s September PMI activity indicator suggested the economic recovery is continuing. The manufacturing sector edged up driven by higher exports while the service sector also improved.

Finally, we read a news story last week that a young man was panic stricken after diving into the sea in San Diego County to swim with what he thought was a basking shark, only to realise it was a great white shark. Should have gone to Spec Savers!

Read Last Week’s Alpha Bites – A Bridge Too Far

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Jaws

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