💥 Will Evergrande trigger the next crisis?

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Today's big stories

US delivery giant FedEx reported worse-than-expected earnings, even as it proves itself more essential than ever
Our analyst looked into whether Evergrande’s bankruptcy could trigger the next financial crisis – Read Now
Restaurant tech vendor Toast listed on the US stock market

Ship Happens

What’s Going On Here?

FedEx reported worse-than-expected earnings late on Tuesday, even as the US shipping giant uses any means necessary to get your deliveries to you on time.

What Does This Mean?

You’d think the ecommerce-fueled demand for deliveries would’ve been good news for FedEx last quarter, and you’d be right – if it had been able to keep up. But the company just can’t find enough drivers to deliver all those yoga mats, despite paying some of them 25% more than it did last year and hiring outside transport services to help pick up the slack (tweet this).

All that extra effort sent FedEx’s costs up around $450 million and its profit down 10% compared to the same quarter last year. And since FedEx reckons those labor shortages will stick around for a while, the company doesn’t have high hopes going forward either: it lowered its profit forecast for the rest of 2021.

Why Should I Care?

The bigger picture: FedEx has the power.
It’s not all bad news for FedEx: that massive demand means it’s been able to up its prices without losing customers along the way. And the company’s taking full advantage of that newfound “pricing power”: it’s already announced it’ll be bumping up surcharges during the ever-lucrative festive season, and said on Monday it’d be hiking standard prices again in January.

Zooming out: The market’s only growing.
FedEx had better find some new drivers soon, with the company expecting the number of deliveries in the US parcel market to grow 10% a year until 2026. A lot of that uptick is thanks to the ecommerce boom, which FedEx reckons will see companies send out around 100 million packages a day by next year.

You might also like: How to back the ecommerce megatrend – plus the rest.

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Analyst Take

Will Evergrande Trigger The Next Financial Crisis?

What’s Going On Here?

If you hadn’t given much thought to China’s second-biggest property developer before this week, you’re not alone.

Evergrande had mostly flown under Western radars until Monday, when its reported failure to meet an interest payment helped cause the biggest US stock market decline in four months.

Here’s why in a nutshell: Evergrande is at the heart of a real estate market that accounts for nearly a third of China’s economy.

It’s also very in debt: it owes $300 billion to various parties, including banks and construction firms. And it’s at risk of slipping behind on those payments.

Clearly, the bankruptcy of an industry powerhouse might not just impact China, but the world’s stock markets, bond markets, and raw material producers too.

Put simply, Evergrande’s bankruptcy has the potential to trigger a global crisis.

So that’s today’s Insight: is it time to start worrying?

Read or listen to the Insight here

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