Etsy buys Depop in $1.6bn gen-Z push; UK to begin CPTPP talks; ITV rejoining FTSE 100 – as it happened

Graeme Wearden

from on 2021-06-02 17:58 (#5JJ2E)

Rolling coverage of the latest economic and financial news, as CPTPP members agree UK can start negotiations to join free trade bloc

Earlier:

6.58pm BST

A late PS: broadcaster ITV is rejoining the FTSE 100.

The latest quarterly reshuffle will see ITV lifted back into the blue-chip index, at the expense of precision engineering firm Renishaw which will return to the FTSE 250.

The Love Island broadcaster's revenue plunged after the hit show was cancelled and episodes of the programme were scaled back during the pandemic but marketing spend is ramping up once again.

There are also hopes for a significant rebound in its Studios business, where it produces content for others, to capitalise on the ongoing streaming wars.

5.29pm BST

Time to wrap up, with a quick summary.

The UK is to begin negotiations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, after its 11 members agreed that accession talks could begin.

CPTTP membership is a huge opportunity for the UK

It will:
bring us closer to some of the world's fastest-growing economies
support jobs across the UK
help us build back a better global trading system

Trade = Jobshttps://t.co/YRtlaZG4gH pic.twitter.com/l7Znu13LWg

As a reminder, it is still easier and cheaper to trade with neighbours, non tariff barriers more important than tariffs (and hardly covered in CPTPP), and suppy chains, usually regional, much more important than end product sales to consumers.

5.01pm BST

In other tax news, the EU has agreed it will force large multinational companies to publish a breakdown of the tax they pay in each of the bloc's member states and in tax havens such as Seychelles.

The move piles pressure on the UK government to follow suit.

4.49pm BST

The FTSE 100 index has closed 27.5 points higher at 7108, up 0.4% today.

That adds to yesterday's rally, and is a new three-week closing high.

4.30pm BST

More trade news. The US has announced - and immediately suspended - tariffs on certain goods from UK, Italy, Spain, Austria, India and Turkey over their digital services tax.

The tariffs are being imposed after the US concluded that these digital taxes discriminated against US tech companies, were inconsistent with principles of international taxation, and burdened U.S. companies.

The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes.

The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today's actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future."

*USTR SAYS TARIFF SUSPENSION PROVIDES TIME FOR #OECD-G20 TALKS - BBG
*USTR SUSPENDS NEW RETALIATORY TARIFFS FOR UP TO 180 DAYShttps://t.co/SVmkV7Tb8j

The #US government announced Wednesday it is suspending for six months any punitive tariffs on Britain, India and four European nations while it works to resolve a dispute over digital services taxes. pic.twitter.com/Fh7IP83pjs

3.58pm BST

Etsy is buying Depop, the British second-hand fashion resale app, for $1.6bn (1.1bn) to tap into the fast-growing trend of generation Z young people reselling clothes online.

Josh Silverman, the chief executive of Brooklyn-based Etsy, said:

We are simply thrilled to be adding Depop - what we believe to be the resale home for gen Z consumers - to the Etsy family."

3.51pm BST

The US stock market has pushed a little higher, in a rather muted session.

Traders seem to be marking time ahead of Friday's US jobs report, which will show if hiring picked up in May after a surprise slowdown in April.

The markets have been all over the place so far in the week, with the dollar initially falling and then rebounding, causing gold and foreign currencies to the opposite.

Traders are evidently not willing or comfortable to commit to one particular direction and are quick to take profit. Overall, though, the underlying trend remains the same: bullish for stocks, gold, crude and other risk assets, and bearish for dollar.

3.20pm BST

America's housing boom may be slowing, as record high prices and low availability hits demand.

US mortgage applications to purchase a home fell 3% last week, while applications to refinance a loan fell 4.6%, the Mortgage Bankers Association reported.

Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity.

In the US, mortgage applications for house purchase fell by 3.1% last week, to the lowest since the post-Covid boom began pic.twitter.com/WZbTnPuU1W

Fever breaking in the housing market?

US mortgage applications, both purchase and refinance have been sliding in recent weeks. pic.twitter.com/BCwWMxC23F

2.52pm BST

Shares in Etsy have risen in early trading as Wall Street reacts to the Depop deal.

After initially popping 3%, they're currently up 1.5% at around $166, a gain of $2.50.

2.28pm BST

While Depop and Etsy both benefited from the move to e-commerce in the pandemic, the travel sector continues to suffer.

European budget airline Wizz Air posted a 576m net loss for the last financial year today, and warned it will make another loss this year unless travel restrictions are lifted faster than planned.

2.01pm BST

Etsy CEO Josh Silverman has told CNBC that Depop has been growing like crazy', expanding by over 100% last year.

And importantly, that's with hardly any marketing spend, he adds, showing Depop is an organic, authentic phenomenon" in the fast-growing recommerce" (second-hand) market.

We think Depop is the most exciting company in the most exciting sector in retail right now.

Resale is growing like crazy, in fact recommerce of clothing is growing 40% year-over-year, and is projected to be a $64bn market in the US alone.

That's four times the US population, and Depop is the choice of Gen-Z.

NEW: $Etsy acquires @depop for $1.6B. @Etsy CEO @jgsilverman on the deal: "Depop is the choice of Gen Z. Depop has been growing like crazy, it grew over 100% last year. Importantly, it's growing with hardly any marketing spend. This is really an organic, authentic phenomenon." pic.twitter.com/govJIfk0Jf

"There's a whole bunch of capabilities one needs to run at scale. At $ETSY, we've gotten pretty good at those things and we think we have a playbook that can really unlock a lot of value," @Etsy CEO @jgsilverman on its $1.6B @depop acquisition. pic.twitter.com/6GO6JUdJbj

1.25pm BST

Etsy's acquisition of Depop shows the growing influence of clothing resale platforms, says the New York Times:

More shoppers are turning to the secondhand market for something cheaper and - potentially - greener as the overproduction of clothing increasingly adds to landfill

The trend appears to have been accelerated by the pandemic as more shoppers looked to declutter wardrobes, earn cash by selling their old clothes or set up fashion customization businesses from their bedrooms.

Etsy is buying Depop. And the race to own resale is ON. @LizziePaton with the news - https://t.co/MlyyAKrPZc

Depop is hoping to tap Etsy's expertise in bolstering community safety and scaling internationally, while Etsy hopes to learn from Depop's mobile expertise and social-media savvy.

Many of the challenges that we are going through as a business are things that Etsy has gone through before," said Maria Raga, Depop's chief executive.

Etsy buys fashion app Depop for $1.6bn in Gen Z' push https://t.co/fPANufRn3O

Etsy expects to finalize the deal by the third quarter of 2021. Depop will remain headquartered in London, Etsy said, operating as a standalone business run by current management.

The deal marks the biggest acquisition yet for Etsy, which went public on the New York Stock Exchange in 2015.

Etsy is buying Gen Z-focused fashion resale app Depop for $1.62 billion https://t.co/P5ua9qvXU0

1.19pm BST

James Wise of venture capital firm Balderton Capital, which has invested in Depop since its seed round of funding, has tweeted about today's sale to Etsy:

Thrilled to share that @depop will be joining @etsy in a deal worth $1.625B, one of the largest of its kind.

We backed Depop from seed to exit & it's been a pleasure to work with @MRaga_Depop and her team, what they've built is exceptional...a short https://t.co/dqPa6THn1k

In <10yrs Depop has:

- given 30M users in 150 countries the chance to create, restyle & resell their fashion
- given a whole generation its first experience of entrepreneurship, with 90% of users <26
- led the way in the sustainability movement by championing pre-loved fashion

As a business Depop has succeeded by:

- obsessively focussing on their community
- understanding how generational shifts create new opportunities in competitive categories
- realising that a truly values-driven brand is worth more than any amount of performance marketing.

We were fortunate to have a front row seat as Depop went from seed to exit.

Much of the venture-industry focuses on individual investors, but every investment is really a team effort.

See how @balderton worked with Depop over the years here:https://t.co/2cwKMUHJBe

12.59pm BST

Etsy also points out that demand for second-hand clothing is growing fast.

The second-hand market is projected to grow at a 39% compound annual growth rate from 2019-2024 in the United States, reaching $64 billion, and to grow to twice the size of fast fashion on a global basis.

Starting first in the U.K. and moving into the U.S. and Australia, Depop now has a community of approximately 30 million registered users across nearly 150 countries.

With 4 million active buyers and 2 million active sellers in 2020, we believe Depop's cohort behavior is particularly impressive: for example, in 2020, 75% of gross merchandise sales was from existing cohorts; ~75% of sellers were also buyers; and, on average, sellers sold approximately 10 items and buyers bought approximately 6 items.

12.33pm BST

British second-hand fashion app Depop is being bought by Etsy, the US e-commerce site for handmade goods and craft supplies, in a $1.6bn deal.

We are simply thrilled to be adding Depop-what we believe to be the resale home for Gen Z consumers-to the Etsy family.

Depop is a vibrant, two-sided marketplace with a passionate community, a highly-differentiated offering of unique items, and we believe significant potential to further scale.

We're on an incredible journey building Depop into a place where the next generation comes to explore unique fashion and be part of a community that's changing the way we shop.

Our community is made up of people who are creating a new fashion system by establishing new trends and making new from old. They come to Depop for the clothes, but stay for the culture.

12.03pm BST

Despite the reopening of the UK economy in April, consumers continued to pay off their credit card bills.

The reopening of non-essential shops on 12^th April wasn't enough to tempt consumers into digging out their credit cards. But the partial reopening of hospitality businesses in May means that consumer credit probably rose last month. And we are still happy with our forecast of a 6% q/q rise in consumer spending in Q2.

Consumers paid back another 0.4bn of consumer credit in April, the eighth consecutive monthly fall. However, the amount of cash in households' bank accounts only rose by 10.7bn, compared to an average monthly rise of 17.6bn in the previous three months.

11.54am BST

More from trade expert David Henig about the limited benefits of the UK joining the trans-Pacific trade pact.

I think a few people might have mentioned the issue of this government over hyping the humdrum for later disappointment. Good example here. On balance fine to seek CPTPP accession dependent on exact terms, but the economic impact is probably negligible. https://t.co/j3IWfMGhxG

Canada, Singapore, Japan, New Zealand, Mexico, Australia, Vietnam are in trade politics terms relatively like minded, and of a similar power status to the UK. Happy to see us talking with them. But transformational it isn't.

11.44am BST

Demand for UK properties picked up in April, after the stamp duty holiday was extended in March to the end of June.

The Bank of England reports that mortgage approvals rose in April, higher than economists expected, and remained relatively strong':

Approvals for house purchase ticked up in April, to 86,900, from 83,400 in March. They have fallen from a recent peak of 103,400 in November, but have remained relatively strong.

RT @BuiltPlace: Instant Info - Bank of England Mortgage Approvals pic.twitter.com/4PXg5PhjhC

UK mortgage approvals rose unexpectedly in April, BOE says https://t.co/pmzgInp6Sm via @MarcDDavies pic.twitter.com/eWZsJDsxw5

Despite weaker net lending, both gross lending and repayments remain above levels seen since the start of 2020.

The recent variability is likely to reflect the reduction in the stamp duty tax, which was initially expected to end in March, but has now been extended to the end of June.

11.14am BST

The oil price is picking up again today, after the Opec+ group agreed yesterday to keep easing supply curbs slowly.

Brent crude is up 1% at $71 per barrel (towards the three-month high of $71.34 hit yesterday), after Opec ministers and key allies including Russia stuck to their policy of gradual supply increases up to July.

OIL MARKET: Brent crude oil closes the day at $70.25 a barrel, highest settlement price since May 2019. Brent prices are now ABOVE pre-pandemic levels | #OOTT

At that point the OPEC+ alliance will have more clarity around the demand side of the equation, and more crucially, whether there's a breakthrough in the US-Iran nuclear negotiations that ultimately brings an overflow of lost supply back online.

Oil's fortunes now hang on diplomatic forces. If there is a deal with Iran, prices will likely suffer a deep correction but perhaps not a trend reversal. OPEC could help balance things out by slowing its own production increases to prevent Iranian barrels from flooding the market. Demand is recovering quickly, so some targeted production increases can probably be absorbed.

OIL MARKET: Morgan Stanley lifts its long-term Brent crude forecast form $50 to $60 a barrel as net-zero drive will cut capex faster than demand declines | #OOTT

10.47am BST

Back in the UK, lockdown reading has helped the Harry Potter publisher Bloomsbury to its third profit upgrade of the year after a 22% surge in annual pre-tax profits.

Bloomsbury profits jump as joy of reading rediscovered' in lockdown https://t.co/X1qpygXjtN

10.37am BST

Here's trade expert David Henig of the European Centre For International Political Economy on CPTPP:

Fine and expected, but worth being pedantic that only 7 countries have actually ratified CPTPP to date. Also that it isn't a particularly 'free trade zone', just an agreement to preferential terms above WTO in terms of tariffs. Both could be important. https://t.co/4eUJ2zxde3

10.23am BST

The Institute for Government have a very useful guide to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership on their website, which was updated in February after the UK applied to join.

It explains that membership shouldn't significantly clash with the UK's Brexit trade deal (as many CPTPP members already have their own agreements with the EU).

While these benefits are not negligible, they are unlikely in any significant way to make up for the economic losses arising from the UK leaving the EU.

If a good has to have at least 70% CPTPP content' to qualify for preferential tariffs, for instance, that 70% can come from any combination of CPTPP countries.

The CPTPP provides for almost complete liberalisation of tariffs among the participants. Tariffs are retained in only a few highly sensitive areas - for example, Japan keeps tariffs on rice, while Canada's dairy industry is also protected.

9.49am BST

The trade benefits for the UK joining CPTPP will be small', warns Robert Ward of The International Institute for Strategic Studies.

Instead, he thinks the important point is CPTPP's statement that UK membership would send a strong signal" to other countries of the importance of free, fair, open, effective, inclusive and rules-based trade (see opening post).

Trade boost to UK from CPTPP w be small. More imp bit lies in CPTPP joint statement-bigger CPTPP commitment to support a free, fair, open, effective, inclusive and rules-based trading system".

UK to begin process to join trans-Pacific trade partnership https://t.co/MvB3xeL9TU

9.17am BST

New Zealand's trade and export growth minister, Damien O'Connor, says an Accession Working Group will be set up to begin the accession process with the UK.

This group will examine how the UK will comply with the existing CPTPP rules and will negotiate the UK's market access commitments.

We look forward to working with our CPTPP partners and the UK to establish how the UK will meet the high standards required in the CPTPP, including those relating to market access.

It will be particularly important that this first accession process sets a strong precedent, both in regard to the substantive commitments expected of the UK, as well as in the adoption of a thorough and robust process."

Today I joined #CPTPP counterparts in agreeing to start the process towards the UK joining #CPTPP. Thank you to NZers who've shared their views on expanded CPTPP membership. Your feedback is appreciated as we work to grow the benefits of this high standards Agreement. pic.twitter.com/RbeHQvNnAL

9.16am BST

The UK government have welcomed the invitation to begin negotiations to join CPTPP.

International Trade Secretary Liz Truss said:

CPTTP membership is a huge opportunity for Britain.

It will help shift our economic centre of gravity away from Europe towards faster-growing parts of the world, and deepen our access to massive consumer markets in the Asia Pacific.

UK to begin process to join the Trans-Pacific Partnership https://t.co/tSItlmee4B via @IsabelRTokyo pic.twitter.com/NX4dYAXMuO

8.48am BST

Secretary of State for International Trade Liz Truss says it's excellent news" that negotiations to join CPTPP can begin.

The government will present its plans to Parliament in the coming weeks" before negotiations start, she adds.

Excellent news that #CPTPP nations have agreed accession process will commence to join this dynamic free trade area of 11 countries.

We'll present our plans to Parliament in the coming weeks before starting negotiations.

https://t.co/SMH0LKATEY

8.44am BST

Australia's trade minister Dan Tehan has tweeted a picture of today's virtual meeting where the CPTPP agreed to start accession talks with the UK.

He adds that the economic and strategic heft" of the partnership would be strengthened by high quality, high ambition economies" joining.

At today's #CPTPP Commission, hosted by @nishy03, we decided to commence an accession process with the United Kingdom. The economic and strategic heft of the #CPTPP will be strengthened through the accession of high quality, high ambition economies. pic.twitter.com/OpTQZGWdJZ

8.16am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK has moved a step closer to joining a major Pacific regional trade bloc as it tries to forge closer trade links with the Asia-Pacific region after its exit from the European Union.

Yasutoshi Nishimura said the move would strengthen economic ties between the U.K. and Japan, as well as making the zone covered by the deal equal to the EU in terms of economic size. He spoke to reporters after hosting an online meeting of ministers and officials from the 11 countries who make up the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The commencement of an accession process with the United Kingdom and the potential expansion of the CPTPP will send a strong signal to our trading partners around the world of our commitment to support a free, fair, open, effective, inclusive and rules-based trading system," the ministers said in a joint statement.

Japan's Economy Minister Yasutoshi Nishimura said the move would strengthen economic ties between Britain and Japan, as well as making the zone covered by the deal equal to the European Union in terms of economic size. https://t.co/yDd5Fb6ngz

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