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Markets stabilise on hopes of government Covid-19 crisis measures

9.06am GMT09:06 Aircraft maker Airbus is stopping production and assembly activities at its plants in France and Spain for the next four days, as it adjusts to the coronavirus. It says: “This will allow sufficient time to implement stringent health and safety conditions in terms of hygiene, cleaning and self-distancing, while improving the efficiency of…

Aircraft maker Airbus is stopping production and assembly activities at its plants in France and Spain for the next four days, as it adjusts to the coronavirus.

It says:


“This will allow sufficient time to implement stringent health and safety conditions in terms of hygiene, cleaning and self-distancing, while improving the efficiency of operations under the new working conditions.”

Wall Street is no longer expected to jump by over 5% later today, which is cutting Europe’s attempted rally off at the knees:

IGSquawk
(@IGSquawk)

Liquidity in US & EU futures remains extremely thin ATM, continued swings likely. #FTSE 5079.23 -1.39%#DAX 8661.64 -0.92%#CAC 3858.94 -0.58%#DOW 20639 +2.03%#SPX 2444 +2.09%#NASDAQ 7170 +3.11%

March 17, 2020

The EU-wide Stoxx 600 has erased its gains, and now down 0.7%. France’s pledge of billions of euros to fight the economic cost of Covid-19 isn’t helping much.

Updated

Rally fizzles out

Oh dear. The early bounce in Europe’s stock markets appears to be fizzling out.

The FTSE 100 is now negative for the day, down 64 points or 1.25% at 5085. It’s being dragged down by the travel sector again — with holiday firm TUI down another 14% and cruise operator Carnival losing 8%.

Compass are the top faller after this morning’s profits warning.

Helal Miah, Investment Research Analyst at The Share Centre, predicts months of turmoil in the markets:


While some investors may begin to ask whether we are close to the bottom, others will see further downside potential and I sit in this camp. We’re only just at the start of the crisis in the UK and judging by what’s going on in Europe we have the disastrous economic consequences to deal with in the coming months, the data will be saddening just like we have seen from China.

“Volatility is here to stay for weeks and months and over this period markets will gyrate according to developments such as the extent of the spread of the disease and the economically damaging measures Governments put in place to halt it. Markets will react to false dawns too amid data releases suggesting a slowing of the spread or even rumours/fake news of a vaccine. A V-shaped recovery is not on the cards.”

City Pub Group starts cutting jobs

Hours after the UK government told people to avoid pubs, an upmarket chain has begun cutting staff.

City Pub Group says it has suffered a “noticeable reductions in trade” in recent days, especially once sporting events were cancelled.

It is now planning a series of cost-cutting measures, including job cuts:

  • reduction in employee costs across head office and at site level;
  • reduction in other variable costs e.g. Sky/BT Sport, entertainment, where applicable;

  • reductions in Director salaries of 25%; and

  • reviewing trading hours to reduce non-productive opening times

City Pub Group is also seeking rent holidays for the next 3-6 months from its landlords, it adds.

UK footwear retailer Shoe Zone has put its dividend on ice, after a drop in shopper numbers. Its shares are down 28% this morning.

Patrick O’Brien
(@pat_gdretail)

Shoe Zone taking the prudent step to defer dividend payment following reduction in footfall in recent days, and uncertain outlook pic.twitter.com/AFPdkN7dg0

March 17, 2020

We’re going to see a lot more of this….

Updated

Catering giant Compass has issued a profits warning this morning, as the coronavirus crisis hits its business hard.

With schools closed, and sports events off, Compass’s revenues are being ‘severely’ hit.

It told shareholders:


The acceleration of containment measures adopted by governments and clients in Continental Europe and North America have affected our expectations for the Half Year. The vast majority of our Sports & Leisure and Education business in these regions has been closed, and our Business & Industry volumes are being severely impacted.

This is expected to wipe between £125m and £225m off Compass’s operating profits fro the first half of 2020.

Shares in Compass have plunged 13% this morning, to the bottom of the FTSE 100 leaderboard.

A currency trader at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, today.

A currency trader at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, today. Photograph: Ahn Young-joon/AP

Despite this morning’s small rally, European markets are still down 30% this year.

Stephen Innes, global chief markets strategist at AxiCorp, says we’re still locked in a scary bear market, due to signs that parts of the economy are shutting down.


Why on earth the S&P500 decided to rally back into a limit up mode again is anyone’s guess as the bear markets come in various sizes. But authentically, this is the monster Grizzly Bear market of them all. Disrupted supply chains didn’t miraculously get fixed this morning, nor did airplanes suddenly take flight, and neither has the ability of businesses and households to meet loan payments in the near term improve. Sure, G-7 had a Draghi “ whatever it takes “moment, but that is not going to get folks back on Expedia.

One essential 2008 comparison, we tend to overlook was that during the Lehman crash outside the financial sector, life went on. In essence, restaurants took bookings; taxis took rides, shops were still bustling. This time around, the entire world is on the precipice of shutting down.

European markets jump

European stock markets are rallying in early trading, pulling back some (but not all!) of Monday’s losses.

In London, the FTSE 100 has gained 101 points or 2%, to 5255 (it lost 4% yesterday).

European markets are sharply higher too; Germany’s DAX popped by 4.6%, while France’s CAC gained 3%.

Investors are encouraged to see that Wall Street is on track to rally at least 5% today (after slumping 12% yesterday).

France pledges €45bn to fight virus war

Paris is scrambling to protect its economy from the coronavirus, pledging to roll out €45bn in support for firms.

Finance minister Bruno Le Maire has said the package will allow firms to deter tax bills and payroll charges due this month (which could tip struggling companies over the edge).

Le Maire says:


“We are going to mobilise 45 billion euros as our first immediate economic assistance to companies.

We don’t want bankruptcies.”

Channelling the same fighting talks we heard from president Macron overnight, Le Maire declared:


There is a war against the virus. There is also an economic and financial war. This economic war will be long-lasting and violent,”

Le Maire was also asked whether the Paris stock market could be closed – he suggested other measures could be taken first, such as banning short-selling.

Intro: Another turnaround Tuesday?

AUSTRALIA-STOCKS-HEALTH-VIRUSPeople are reflected in a window at the Australian Securities Exchange in Sydney on March 17, 202o

People are reflected in a window at the Australian Securities Exchange in Sydney on March 17, 202o Photograph: David Gray/AFP via Getty Images

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

After another torrid Monday, European and US stock markets are expected to bounce back today – lifted by hopes that policymaker will step in to fight the coronavirus recession.

Wall Street has an almighty tumble on Monday, with the Dow slumping almost 13% for the first time since the 1987 crash (and only the second time ever). The sell-off came as Donald Trump suggested Covid-19 might not be under control in the US until August.

But sentiment has turned around overnight, with Wall Street futures now up 5% — the maximum allowed in overnight trading.

Magnus Wheatley
(@magnuswheatley)

Good market news to wake up to. Dow Futures hit “limit up” as the market soars – probably on the bet that the US Gov’t is prepared to back-stop airlines 100% and this will most likely extend to other sectors (like in France). Dow Futures up 681 points. pic.twitter.com/E4McHXwkdE

March 17, 2020

With global activity contracting alarmingly, pressure is mounting on governments to take serious action to protect jobs and workers.

Overnight, the US airlines asked for $50bn bailout as the industry staggers in the wake of the Covid-19 pandemic.

The UK chancellor, Rishi Sunak, is expected to announce a new package of support for businesses hit by the outbreak today. He’s under massive pressure to protect firms.

The government’s advice to stop going out where possible will hurt pubs, restaurants and venues terribly badly – with some wondering how they’ll survive. Understandably, they’re distressed that the government won’t order them to close (which would trigger insurance payouts).

Australia’s central bank put its finger on the problem overnight. The minutes of its latest meeting warned:


“In considering the policy decision, members observed that it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world.”

But central bankers can’t solve this crisis. Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank points out:


What small and medium size businesses need is cash poured directly in, without passing through the financial system.

Hence, governments around the world are seeking other measures to calm down the markets’ nerves. The UK promised extra help for businesses battling the virus-led slowdown, and temporary business shutdowns. France pledged to allocate 300 billion euros of bank loans to companies hit by the pandemic. Spain banned short selling for a month to contain the heavy volatility that may cause additional damage to the financial system.

Coming up today:

The ZEW survey of economic confidence, due this morning, will show just how panicky investors are about the situation (spoiler alert: very!). We also get new UK jobs report, which may show a rise in the claimant count in February — the first sign of the downturn beginning?

The agenda

  • 9.30am: UK unemployment data: Jobless rate expected to remain at 3.8% in November-January
  • 10am GMT: ZEW survey of eurozone economic confidence: expected to slump to -26.4 in March from 8.7 in February

Updated

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