- FTSE 100 closes up 128 points
- US indices up
- British Airways warns staff lay-offs are on the way
5.30pm: FTSE 100 closes higher
FTSE 100 index closed the day ahead but off the earlier highs as global markets tried to make up for some brutal selling this week as the coronavirus crisis deepens.
Britain’s blue chip benchmark closed ahead by around 128 points on Friday at 5,366, having tanked nearly 11% on Thursday. Over the week as a whole, the Footsie has shed nearly 17%.
It comes as the World Health Organization confirmed that Europe was now the new epicenter for the disease outbreak, while the US response has widened and appears to be close to approving huge federal measures.
Reports are emerging that President Trump is poised to declare a national emergency later today.
“This week will go down in the history books as one of the craziest periods ever witnessed by markets. But it could be just the beginning,” said analyst Chris Beauchamp, at London-based online trading group IG.
“The predictions about the impact of the virus, apparently so far-fetched a few weeks ago, now seem oddly prescient. And with the US, Germany and UK still to go through the worst of it, those holding on to shares even after the past week may soon regret their decision not to sell earlier. Stocks are much cheaper than a month ago, but are set to get much cheaper if the past week is anything to go by.”
On Wall Street, the Dow Jones Industrial Average added over 548 points on the day (having plunged nearly 10% yesterday), while the S&P 500 gained over 62 at 2,543. The Nasdaq added around 172 points.
2.40pm: British Airways warns staff to expect lay-offs
Never waste a good crisis is an old adage and it looks like British Airways, owned by International Consolidated Airlines (LON:IAG) is adhering to it.
The airline’s chief executive, Alex Cruz, has sent an internal memo to all British Airways start warning them to brace for jobs cuts as the airline industry faces “a crisis of global proportions like no other we have known”, the Reuters news agency reported.
Lay-offs are on the way, Cruz warned – although presumably not in the board room.
Never waste a good crisis is an old adage and it looks like British Airways, owned by International Consolidated Airlines (LON:IAG) is adhering to it. The airline’s chief executive, Alex Cruz, has sent an internal memo to all British Airways start warning them to brace for jobs cuts as the airline industry faces “a crisis of global proportions like no other we have known”, the Reuters news agency reported. Lay-offs are on the way, Cruz warned – although presumably not in the board room. IAG shares, up 13% at 377.2p, were among the top performers on the Footsie, in contrast to sector peers such as easyJet PLC (LON:EZJ) and WizzAir Holdings PLC (LON:WIZZ), where the rises were more modest; the former was up 5.7% and the latter was 2.3% higher.
BA boss tells staff jobs will go because of coronavirus, his message was titled “The Survival of British Airways”. Mr Cruz said: “We can no longer sustain our current level of employment and jobs would be lost, perhaps for a short term, perhaps long term.
— Stephen Rush (@GatwickFirst) March 13, 2020
Following the recent tumultuous events, Wells Fargo Securities has updated its recession probability model for the US economy. “The COVID-19 outbreak and the collapse in oil prices have imparted two negative shocks to the US economy in quick succession. Weaker economic growth in many of America’s major trading partners on account of the COVID-19 outbreak will depress US exports in coming quarters. More importantly, the significant decline in economic activity in industries such as airlines, hotels, casinos, etc. will reverberate around the economy. In addition, the collapse in oil prices in recent weeks will impart a negative blow to the energy industry in the United States,” Wells Fargo said. “Under our ‘best case’ scenario, the probability of recession in the next six months is rather low at only 16%,” it continued. “In our view, however, this model-based probability vastly understates the ‘true’ probability at present because it is based on the LEI [leading economic index] and the employment component of the ISM manufacturing index through February; however, both of these indices will likely weaken markedly in coming months due to the turbulence that the economy has subsequently encountered,” the finance house predicted. After plugging in some assumptions, “the probability of recession shoots up to near certainty, that is, 99%,” it added. US investors don’t seem perturbed – today, at least – with the Dow Jones up 3.1% and the S&P 500 up 3.8%. In the UK, the FTSE 100 was up 243 points (4.6%) at 5,480.
IAG shares, up 13% at 377.2p, were among the top performers on the Footsie, in contrast to sector peers such as easyJet PLC (LON:EZJ) and WizzAir Holdings PLC (LON:WIZZ), where the rises were more modest; the former was up 5.7% and the latter was 2.3% higher.
Following the recent tumultuous events, Wells Fargo Securities has updated its recession probability model for the US economy.
“The COVID-19 outbreak and the collapse in oil prices have imparted two negative shocks to the US economy in quick succession. Weaker economic growth in many of America’s major trading partners on account of the COVID-19 outbreak will depress US exports in coming quarters. More importantly, the significant decline in economic activity in industries such as airlines, hotels, casinos, etc. will reverberate around the economy. In addition, the collapse in oil prices in recent weeks will impart a negative blow to the energy industry in the United States,” Wells Fargo said.
“Under our ‘best case’ scenario, the probability of recession in the next six months is rather low at only 16%,” it continued.
“In our view, however, this model-based probability vastly understates the ‘true’ probability at present because it is based on the LEI [leading economic index] and the employment component of the ISM manufacturing index through February; however, both of these indices will likely weaken markedly in coming months due to the turbulence that the economy has subsequently encountered,” the finance house predicted.
After plugging in some assumptions, “the probability of recession shoots up to near certainty, that is, 99%,” it added.
US investors don’t seem perturbed – today, at least – with the Dow Jones up 3.1% and the S&P 500 up 3.8%.
In the UK, the FTSE 100 was up 243 points (4.6%) at 5,480.
2.10pm: US stocks off to a flying start
After suffering their worst day yesterday since Black Monday in October 1987, US benchmarks bounced back today.
The Dow Jones shot up 716 points (3.4%) to 21,916 and the S&P 500 surged 95 points (3.8%) ato 2,576.
“The volatility right now is simply staggering, but it does look like investors are keen to buy on what look like some mightily cheap valuations. At some point, value will take over from fear, but I’m still not convinced we’re there yet and stabilisation is still a wee bit away,” ventured Neil Wilson at markets.com.
In London, the FTSE 100’s second surge of the day has petered out but the index is still holding on to a very useful 242 point (4.6%) gain at 5,479.
13.10pm: It could all be done and dusted by June … or December
Holger Schmieding, the chief economist at Berenberg, has done some crystal ball-gazing on how long the disruption caused by the coronavirus will affect Europe.
Schmieding’s base case is that the worst will be over by June.
“We expect a broad-based sharp decline in output in March that will likely worsen in April and May as authorities take ever more restrictive steps to contain the spread of COVID-19. As our base case, we now assume drops in quarterly GDP [gross domestic product] by 2.0% qoq [quarter-on-quarter] in the Eurozone and by 1.1% in the UK,” he said.
“The recovery could begin in June as the spread of the virus slows down and a surge in government spending enables health systems to cope better than before but even with a rebound in H2 2020 [the second half of 2020], annual GDP for the year as a whole would decline by 1% in the Eurozone and 0.7% in the UK. Previously, we had expected -0.1% yoy [year-on-year] for the Eurozone and 0.9% yoy for the UK as our base case. From such a low level, GDP could rebound by 2.0% in the Eurozone and by 2.3% in the UK in 2021,” Schmieding said, explaining the bank’s base case.
On the other hand … if the effluent really hits the fan, the disruption could last until the end of 2020.
“In a tail-risk bad-case scenario, a further spread of the virus and severe restrictions on normal activities would prolong the recession through the second half of 2020 before a rebound starts in early 2021,” Schmieding gloom-mongered.
“That scenario would entail a 3.5% contraction in 2020 GDP in the Eurozone and a 2.0% fall for the UK before a solid rebound in 2021. The rebound would carry on with above-trend gains in GDP from a still low level in 2022. Ultimately, however, the impact of COVID-19 will be temporary. Increasingly, policymakers are showing that they are ready to do what it takes to avoid a 2008/09-style scenario,” he reassured.
“ The bigger the near-term hit, the stronger the rebound thereafter from a very low level,” Schmieding predicted.
“Even a bad-case scenario would not warrant a permanently lower valuation for equities anywhere close to what markets are currently pricing in. Unfortunately, even the huge monetary, fiscal and regulatory policy response on the way across the western world is no obvious circuit breaker in a medical emergency. We need more clarity about the course of the pandemic first,” he admitted.
The FTSE 100 was up 384 points (7.3%) at 5,622, 74 points below its intra-day peak.
12.10pm. People’s Bank’s move restores vigour
The People’s Bank of China decision to cut the reserve requirement ratio (RRR) for some banks by 0.5 to 1 percentage point has rekindled investors’ enthusiasm.
The FTSE 100, although slightly off the top, has left the 5,500 level far behind hit and raced 337 points (6.4%) higher to 5,574.
Despite China’s move to release 550bn yuan in liquidity in a bigger-than-expected RRR cut, ING is “not that optimistic”.
“With the pandemic rapidly spreading, supply chains are not the only thing taking the hit, global consumption demand will also fall too. Smaller factories and exporters face bigger risks and banks will be taking this into consideration when they assess credit risks.
“This is why we’re not that optimistic and believe the ultimate amount of inclusive finance will be significantly smaller than what the central bank expects,” ING said.
At present, US investors look like they are on board with the rebound theory; the Dow Jones is expected to open about 1,014 points higher at 22,215 while the S&P 500 is tipped to start at around 2,599, up 118 points.
10.45am: After a pause for breath, blue-chips kick on again
The rally is back on as investors take heart from improved Chinese coronavirus data and action by the People’s Bank of China to boost liquidity.
The FTSE 100 is up 251 points (4.8%) at 5,489 with British Airways owner International Consolidated Airlines (LON:IAG), up 11.0%, leading the way.
Stocks closely attuned to the health of the Chinese economy, such as steel maker Evraz PLC (LON:EVR) and miner BHP Group PLC (LON:BHP), both up 11%, are proving more popular than ice cream on a hot day.
China’s central bank will implement targeted reserve requirement ratio cuts for some financial institutions on next Monday, releasing 550bln renminbi in long term funds.
The move follows a pledge earlier today by the Bank of Japan to also boost liquidity in markets.
“With China over the worst of this crisis, we are seeing investors scoop up mining names that have been heavily hit; however, it is likely to get worse before it will get better, with lockdowns like those in Wuhan and Italy likely to take shape in countries such as Spain, France, and Germany before long,” predicted IG’s Joshua Mahony.
So far, no heavyweight company has given any indication it is worried about going bust but BT Group PLC (LON:BT.A) has revealed that its chief executive, Philip Jansen, has tested positive for COVID-19.
BT’s shares were up 5.9% so the market did not seem unduly worried.
So this isn’t coronavirus good. Three days ago BT CEO Philip Jansen was with this lot – culture secretary @OliverDowden and the chiefs of Vodafone UK, O2 U.K, Three UK etc. Let’s hope it was an anti-bacterial- tastic meeting people https://t.co/rP2rWCe6aH
— Mark Sweney (@marksweney) March 12, 2020
9.20am: Rally running out of steam already
There was a time when a triple-digit rise for the Footsie would be cause for celebration.
Now it feels like finding out there was a 50p coin down the back of the sofa that has just been destroyed by fire.
The FTSE 100 was up 107 points (2.0%) at 5,345, already 243 points below its intra-day high, which just goes to show you should never give succour an even break.
Many of the usual suspects are failing to participate in the rally – travel companies, bookmakers, housebuilders and asset managers.
“After stocks experienced the worst sell-off since Black Monday over three decades ago, there is a sense that the market has more than priced in the negative impact that coronavirus headwinds could bring,” said Fiona Cincotta at GAINCapital.
“Let’s not forget that China has recorded the lowest level of infections with just eight new confirmed cases. This proves that with containment measures such as lockdown, strict quarantine and travel restriction it is possible for a country to rebound and relatively quickly. China has sent a specialist team to Italy to help get control over the outbreak. There is light at the end of the coronavirus tunnel, which in Europe and US we are just entering,” she continued, before adding, “However, the chart is not quite so convincing. Any stronger starts that we have seen this week have not been sustained into the afternoons so there is plenty of caution on trading floors this morning.”
8.35am: Not scary yet
The ride that is the FTSE 100 index took an upward turn after Thursday’s massed sell-off as the Fed’s US$5 trillion intervention to ameliorate the worst economic effects of coronavirus appeared, belatedly, to calm markets.
The index of UK blue-chips advanced 252 points to 5,489.26 nin early deals.
This is a cash hose that’s pointed at the US. But the fact that policymakers there are finally starting grasp the nettle appears to have engendered some positivity.
Still, there are those who believe turning on the cash taps at this point is a misstep.
“As we have mentioned in our earlier reports, trying to boost activity through cheap and abundant liquidity at a time companies slow down operations to stop the coronavirus contagion is swimming against a strong current,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“At this point, there is little alternative to letting the knife hit the ground.”
The miners led the revival with BHP (LON:BHP) and Rio Tinto (LON:RIO) both up 12%. The sector has been hard hit by fears of a global recession, which would see a dramatic tail-off in demand for natural resources.
Among the small-caps, Redx Pharma (LON:REDX) leapt—————– 197% higher after it said it had received a highly conditional bid approach by a company led by ImClone founder Sam Waksal.
Proactive news headlines:
A company led by a colourful biotech entrepreneur and the former head of the football league has made another private approach for Redx Pharma PLC (LON:REDX) two weeks after discussions were terminated. In that time, Redx, led by Lisa Anson, has brokered a £26mln funding package that secured the company’s immediate future. In a surprise announcement on Friday, the company confirmed that Yesod Bio-Sciences has returned to the table with an indicative 15p a share offer. The stock closed Thursday at 4.5p.
Condor Gold PLC (LON:CNR) said considerable progress has been made towards securing the environmental permit for the development of the La India open pit in Nicaragua. In its results covering the second half of 2019, the AIM-listed exploration and development company noted that mine schedule, waste dump schedule, water and sewage management studies for the processing plant offices and accommodation have been completed and Tierra Group is fully engineering the tailing storage facility and completing designs for the surface water management system required for the operation of the mine.
Frontier IP PLC (LON:FIPP) investee company The Vaccine Group (TVG) said it is making “significant progress” with its animal vaccine platform and, significantly, has started work on an animal inoculation that would prevent the spread of coronavirus from animal to human. In a comprehensive update, TVG said rabbit trials of a prototype bovine mastitis drug have revealed “significant potential for new intellectual property and demonstrated the technology’s ability to deliver strong, targeted immune responses”.
Directa Plus PLC (LON:DCTA), a producer of graphene nanoplatelets-based products, said trading in the first quarter of 2020 has been robust. Revenues are expected to clock in at around €1.52mln, slightly more than triple the level they were in the same quarter of 2019. This significant improvement has been primarily driven by the strengthening performance of Setcar, Directa Plus’s environmental division.
Tower Resources PLC (LON:TRP) has reported an updated reserves report for the Thali project, offshore Cameroon, where the company has been awaiting the completion of a farm-out deal. The new third-party assessment, authored by Oilfield International, confirms 18mln barrels of proven reserves in the Njonji-1 and Njonji-2 fault blocks (unchanged on previous estimates) along with 20mln barrels of mean prospective resources across the Njonji South and Njonji South-West fault blocks.
Bahamas Petroleum Company PLC (LON:BPC) has moved back its estimated timeline for the Perseverance-1 exploration well as a result of supply chain disruption caused by the Covid19 coronavirus pandemic. Perseverance-1 is now anticipated in late May/early June. In the prior timeline the well was expected to spud in April 2020.
Sunrise Resources PLC (LON:SRES) said its Annual General Meeting (AGM) will be held at 12:00 noon. on 19 March 2020 at the company’s offices at Silk Point, Queens Avenue, Macclesfield, Cheshire SK10 2BB. However, in view of the ongoing coronavirus pandemic, it is now encouraging shareholders to vote electronically or to appoint the chairman as their proxy with their voting instructions rather than attend the meeting in person, and in order to reduce the risk of infection, the meeting will end immediately following the business of the AGM and there will be no corporate presentation, Q&A or refreshments. Sunrise said it is taking these precautionary measures to safeguard its shareholders’ and employees’ health and make the AGM as safe and efficient as possible.
Avation PLC (LON: AVAP), the commercial passenger aircraft leasing company, announced that on 12 March 2020 the company repurchased 10,000 ordinary shares through the market at a price of 225p each, which and will be held in treasury.
6.30am: Friday the13th rally?
London is set to attempt a rally, leaving it out of step with Asian markets this morning, which are once again retreating rapidly.
Spread betting quotes point to the FTSE 100 opening 185 points higher at 5,422 after giving up 639 points yesterday.
“As if this week couldn’t get any stranger, today is a real Black Friday, Friday the 13th. Friday the 13th is also a rather infamous series of slasher movies, with the main protagonist, Jason Voorhees, resurrected in a series of sequels to wreak havoc on the local teen population on various Friday the 13ths. From a financial markets point of view, Jason hasn’t bothered waiting for Friday this time, slashing his way through equity, energy, currencies and now bond markets throughout the week. He has left a trail of destruction in his wake far higher than the body count in any of his starring roles,” said Jeffrey Halley at Oanda, who sounds as if he might have been forced to self-isolate with nothing but a TV and DVD player to keep him company.
“The Federal Reserve did its best last night, announcing a three-day $1.5 trillion blitz of liquidity to the markets via the repo market. That only caused a temporary pause in the markets sell-off, which resumed shortly thereafter. The limitations of monetary policy are being laid bare by the financial markets when used in isolation.
“Most worryingly, US bond yields rose last night, when really, the situation was ripe for a mass stampede to the US Treasury market driving down yields. That suggests two things. One, credit is tightening, a gruesome scenario for business. Two, investors are now moving to the ultimate haven, hoarding cash in boxes under the bed,” Halley added.
US equity markets suffered their worst day since 1987, with the main benchmarks all hitting their 10% circuit breakers at one stage.
The Dow Jones closed 2,353 points lower at 21,201 and the S&P 261 points lighter at 2,481.
In Asia, Japan’s Nikkei 225 is off 987 points at 17,573 and Hong Kong’s Hang Seng is down 630 points at 23,679 this morning.
The markets may be in freefall but corporate news still has to happen but mercifully there does not seem to be much of it scheduled; London had more than its fair share of companies warning yesterday that they could go bust and any unscheduled corporate announcements today are likely to be because of a dire need to inform shareholders of bad news.
Significant announcements expected on Friday:
Economic data: US Michigan consumer sentiment
Around the markets:
- Sterling: US$1.2552, down 0.17 cents
- 10-year gilt: yielding 0.274%, down 2 basis points
- Gold: US$1,576.40 an ounce, down US$13.90
- Brent crude: US$33.77 a barrel, up 55 cents
- Bitcoin: US$4,947, down US$825
- The US central bank is to inject trillions of dollars into the financial system to ease stresses in short-term funding and US Treasury markets following alarm over liquidity conditions in US treasuries.
- Beleaguered NMC Health has uncovered evidence of suspected fraud in its finances following revelations over undisclosed debt on its balance sheet.
- Airbnb is being taken to court by IBM over what it claims is the illegal use of four patents.
The Daily Telegraph
- Goldman Sachs has triggered an emergency coronavirus plan, banning gatherings of more than 20 people and telling its 38,000 staff worldwide that they will be split into so-called “blue” and “white” teams.
- Battered airlines are pleading for a bailout from ministers as the industry reels in the face of the coronavirus pandemic.
- Cineworld has warned that it could collapse due to coronavirus as shares in the FTSE 250 chain tumbled as much as 49%.
- Shares in Premier Oil have dived again after a further drop in the price of crude, fuelling fresh fears for the embattled North Sea explorer.
- The price of Bitcoin has plunged to its lowest level in 11 months, endangering hopes that it can serve as a haven asset during the worsening coronavirus pandemic.
- The European Central Bank said it would provide an additional €120 billion of stimulus to help the eurozone economy overcome the coronavirus shock, but disappointed markets by leaving interest rates unchanged.
- Saudi Arabia has ordered its state oil giant to boost production capacity by a million barrels per day as it escalates its price war against Russia and America.
- Trainline lost more than 10% of its value after warning that growth has slowed because of the coronavirus outbreak.
- Intu Properties has warned of a “material uncertainty” over its ability to continue as a going concern as it reported a £2 billion loss.
- Rishi Sunak’s Budget plans are ‘nothing like as generous as they appear’ and spending on most public services will be lower in 2025 than in 2010, according to the Institute for Fiscal Studies.
- Lloyd’s of London will shut its underwriting floors for the first time in its history on Friday as a test of the 333-year-old insurance market’s coronavirus contingency plans.
- Norwegian Air will lay off around half of its staff and cancel 4,000 flights as it struggles to stay afloat.
- Hays Travel, the company which rescued more than 400 Thomas Cook shops last year, has asked staff to take unpaid leave in a bid to ease the pressure caused by coronavirus.
- Moss Bros shares surged almost 50% after it agreed to go private in a £22.6 million deal.
- Accounting errors by Galliford Try inflated its net assets by more than £94 million, according to the accounting watchdog.
- The stricken oil explorer Tullow Oil announced plans to slash its workforce by a third and attempt to raise £780 million by selling parts of the business.
- Airlines have axed more flights and demanded urgent government action to help offset the financial impact they are facing from the coronavirus outbreak.
- Shares in Finablr, the embattled owner of Travelex, have crashed by 65% due to coronavirus impact.
- WH Smith has issued a profit warning because of the coronavirus pandemic, which has led to a major drop in shoppers at its airport outlets.
- More than 300,000 investors trapped in Neil Woodford’s failed flagship investment fund will share £142 million as part of a second payout.