FTSE 100 succumbs to another bout of the coronavirus jitters after China’s industrial profits slump


The FTSE 100 wiped out all of Thursday’s gain after investors contracted another bout of the coronavirus jitters.

A 40% slump in China’s industrial profits provided a dose of reality and possibly served as a warning of the scale of the recessions to come.

“Seeing a figure as bad as that, it’s understandable why other leaders, notably US President Donald Trump are reluctant to shut down the economy,” said Jasper Lawler, head of research at London Capital Group.

“Trump said has suggested reopening certain parts of the country like the farm belt of parts of the mid-west unaffected.

“The current calculus seems to be based on the West repeating China’s coronavirus experience.

“That is experiencing a lockdown period of similar length to China and a similar lifecycle of rising then falling virus cases. If that’s wrong and it takes longer, markets need to readjust with another leg lower.”

Cruise operator Carnival (LON:CCL) sank 10% amid fears a longer global lockdown would hit the travel and holiday sector harder than currently modelled.

The closure of building sites and the suspended animation into which the builders have thrown hit Berkeley Group (LON:BKG), off 7.9%, and Persimmon (LON:PSN), down 7.3%.

6.39am: FTSE 100 called lower

The US may be by some definitions in a bull market but UK blue-chips seem disinclined to play ball/bull.

Spread betting quotes suggest that despite yesterday afternoon’s late rally, the FTSE 100 will open around 82 points softer at 5,734.

“Some market participants might be getting ahead of themselves,” suggested Michael Hewson at CMC Markets.

“Markets appear to be pricing in a V-shaped recovery or some form of U-shaped one. Neither is likely, and it was a fear articulated by the Bank of England yesterday, who warned of the risk of lasting damage to the UK economy, as a result of widespread business failures, and a sharp rise in unemployment,” he added.

So, about that bull market … the Dow Jones 30-share average rose 1,352 points to 22,552 yesterday and is up 21% over three days, hence the assertion that this is now a bull market. It’s more of a bull in a china shop market, with wreckage everywhere.

Nevertheless, the S&P closed 155 points firmer yesterday at 2,630 while Asian markets this morning have made good progress, with Japan’s Nikkei 225 index up 453 points (2.4%(at 19,117 and Hong Kong’s Hang Seng index up 191 points (0.8%) at 23,544.

In theory, the corporate schedule in London on Friday is set to be quiet; in practice, it is likely to be a day of rescinded dividends and withdrawn profit guidance statements.

Renewable energy supplier SSE PLC (LON:SSE) is one of those stocks fund managers rely on for its dividends so the City’s stock-shepherds will be keeping a close watch on its pre-close trading statement.

In January, the FTSE 100 group reiterated its commitment to its dividend plan for the next five years, with a dividend of 80p per share expected for the current year, down from 97.5p a year earlier.

Earlier this week, analysts at Goldman Sachs upgraded SSE to ‘buy’ in a note on the European utilities sector.

“We would use the recent sell-off to gain exposure to quality, secular growers, as we expect ‘net zero policies’ to make a comeback as a tool to stimulate the economy, once the most acute part of the crisis is over,” the investment bank said.

In the US, the House of Representatives is set to vote on the US$2,000bn fiscal package to support the country’s people and companies.

Although economists at Danske Bank said it “may hit some obstacles”, it is widely expected to be rubber-stamped without any major hassle.

After the shockingly large US unemployment claims number a day earlier, there’s also spending data due Stateside.

Significant announcements that had been expected:

Finals: Applegreen PLC (LON:APGN), Robinson PLC (LON:RBN), Uniphar PLC (LON:UPR)

Interims: Bowleven PLC (LON:BLVN), CVS Group PLC (LON:CVSG)

Trading statement: SSE PLC (LON:SSE)

Economic data: US personal spending

Around the markets

  • Sterling: US$1.2265, up 0.61 cents
  • 10-year gilt: yielding 0.399%, down 4.24 basis points
  • Gold: US$1,643.50 an ounce, down US$7.70
  • Brent crude: US$28.88 a barrel, up 23 cents
  • Bitcoin: US$6,681, down US$58

Business headlines

Financial Times

The Chancellor of the Exchequer, Rishi Sunak has unveiled a GBP3 billion-a-month package to support up to 3.8mln self-employed workers hit by the fallout of coronavirus.

Several Michelin-starred and other high-end restaurants have gone into the food delivery game in big UK cities as they battle to maintain revenues.

Two non-executive directors at supermarket chain Wm Morrison have resigned in an escalating disagreement over corporate governance

The Daily Telegraph

The Government halted the housing market on Thursday after financial institutions said they could no longer operate properly.

The Government has formally requested a consortium of UK manufacturers to speed up production of a new ventilator based on existing technology.

The Times

Nearly 3.3 million Americans lost their jobs last week, the most in US history, as businesses were ordered to shut to combat the rapid spread of coronavirus.

Companies in every industry in Britain have been hit hard and expect the coronavirus crisis to be worse than the great recession, according to a Bank of England survey of businesses.

Former chairman of Independent Commission on Banking, John Vickers, has urged the Bank of England to block more than GBP7.5 billion of dividends to be paid out by banks.

Lloyd’s of London is likely to take a substantial hit from coronavirus claims but is robust enough to cope, according to its chairman.

British Land has suspended future dividend payments and halted construction work on London developments.

Weir Group has cancelled its dividend and slashed jobs and spending to preserve cash.

Shop closures will cost Dixons Carphone about GBP400 million in sales this year, the electricals retailer has said in its third profit warning in 12 months.

The Norwegian state-owned pension fund told members that it had lost just over 16% of its worth since the beginning of the year.

A single client that got into difficulties during the market turmoil of recent weeks will cost the Dutch lender ABN Amro $200 million.

The Guardian

British car production will slump to its lowest level since the financial crisis this year, the industry has warned.

Intu Properties has said it will breach the terms on its debt commitments following a collapse in the rents received from its retail tenants unless it can secure debt waivers from its lenders.

Next said it had taken the “difficult decision” to close its website as the coronavirus shutdown threatens to wipe more than GBP11 billion off fashion sales this year.

Daily Mail

Tiles and wood flooring retailer Topps Tiles says it should be able to maintain its financial strength even if its stores remain shut for twelve weeks.

AIM-listed fashion retailer Quiz has warned that sales and margins will be ‘materially’ below expectations this month.

Sky and BT could lose nearly GBP1 billion in revenues if top-flight sports remain off-air until August, a report warns.

Chiquito was on the brink of collapse last night as the Mexican brand, owned by The Restaurant Group, filed a notice of intention to appoint administrators, putting around 1,500 jobs at risk.


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