ADVFN Morning London Market Report: Friday 20 March 2020

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London open: Stocks rally after central bank intervention

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London stocks rallied in early trade on Friday as investors welcomed central bank intervention, but the Covid-19 profit warnings and dividend cancellations kept rolling in.

At 0850 GMT, the FTSE 100 was up 2.9% at 5,299.96.

On Thursday, the Bank of England slashed interest rates to a record low of 0.1% from 0.25% and announced another £200bn of bond buying, while the Federal Reserve extended US dollar swap lines to a host of smaller central banks including Singapore, Australia, South Korea and Brazil to help alleviate pressure on their falling currencies.

Oanda analyst Jeffrey Halley said: “The shoulder-launched artillery barrage from the worlds’ central banks and government treasuries seems to have stopped the rot sweeping the global economy for now.”

Still, Markets.com analyst Neil Wilson sounded a note of caution, suggesting it could just be a case of “false optimism”.

“The full extent of the economic damage remains unknown, yet markets tend to move ahead of the real world and will be pricing for 2021-22 already – global stocks will overshoot and bottom out well ahead of the real economy,” he said. “On the other hand, a drawdown of this scale usually takes months to play out. Picking a bottom is always the hardest part of trading.”

Wilson said the problem as ever is the weekend risk. “Are investors prepared to hold much of a book over the weekend? And, of course, whilst we see glimpses of stability in markets, volatility remains elevated and uncertainty over the economic outlook is high.”

Earlier, the BoE announced that it had cancelled annual stress tests for major banks to help it focus on lending during the coronavirus crisis. The Bank said the cancellation was “intended to help lenders focus on meeting the needs of UK households and businesses via the continuing provision of credit”.

“This is in line with (previous) measures, which included a decision…to reduce the UK countercyclical buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect.”

In equity marketsInterContinental Hotels was the standout gainer even as it warned that global revenue per available room was set to tumble 60% in March due to the coronavirus outbreak and scrapped its dividend, with demand for hotels currently at the lowest levels it has ever seen.

Pub group JD Wetherspoon surged despite cancelling its interim dividend and warning on full-year profits as the coronavirus and government advice to stay away from pubs and restaurants hit current sales.

Premier Inn owner Whitbread and budget airline easyJet – both of which have been hit hard lately amid worries about the impact of the coronavirus – were on the front foot.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc +11.78% +43.05 408.40
2 Intercontinental Hotels Group Plc +11.53% +275.00 2,660.50
3 Standard Life Aberdeen Plc +10.76% +19.10 196.55
4 Whitbread Plc +10.17% +214.00 2,319.00
5 Tui Ag +10.14% +34.30 372.40
6 Prudential Plc +9.96% +75.40 832.20
7 Royal Dutch Shell Plc +9.25% +88.80 1,048.80
8 Easyjet Plc +9.15% +46.40 553.60
9 Intertek Group Plc +8.45% +352.00 4,516.00
10 Royal Dutch Shell Plc +7.68% +78.40 1,099.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Rightmove Plc -7.41% -35.20 439.80
2 Auto Trader Group Plc -6.81% -29.10 398.40
3 Reckitt Benckiser Group Plc -5.10% -315.00 5,858.00
4 Marks And Spencer Group Plc -4.87% -5.65 110.35
5 Itv Plc -2.75% -1.76 62.26
6 Rolls-royce Holdings Plc -2.74% -10.00 355.30
7 Unilever Plc -2.67% -116.00 4,225.00
8 Royal Bank Of Scotland Group Plc -2.49% -3.05 119.20
9 Morrison (wm) Supermarkets Plc -2.28% -4.35 186.20
10 Kingfisher Plc -2.11% -2.80 130.00

 

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Share Type Amount Price Return Ex-Date Pay Date
Devro plc Final 6.3p £1.59 4.00% 26-Mar-20 07-May-20
888 Hldgs Final 3.886p(5c)(E) £1.08 3.60% 26-Mar-20 21-May-20
Phoenix Group Holdings Plc Final 23.8p(E) £7.13 3.30% 26-Mar-20 01-May-20
Royal Bank of Scotland Group plc Special 5p £1.68 3.00% 26-Mar-20 04-May-20
Schroders Final 79p £28.84 2.70% 26-Mar-20 07-May-20
Prudential plc Final 35p(E) £12.89 2.70% 26-Mar-20 15-May-20
Pearson plc Final 13.5p £5.65 2.40% 26-Mar-20 07-May-20
Fidelity European Values plc Final 5.1p(E) £2.55 2.00% 26-Mar-20 22-May-20
Old Mutual Limited Final 4.072p(80C)(E) £2.11 1.90% 26-Mar-20 28-Apr-20
Royal Bank of Scotland Group plc Final 3p £1.68 1.80% 26-Mar-20 04-May-20
British American Tobacco Plc Quarterly 52.6p £32.04 1.60% 26-Mar-20 13-May-20
Go-Ahead Group plc Interim 30.2p(E) £18.81 1.60% 26-Mar-20 10-Apr-20
British Land Co plc Quarterly 7.983p £5.04 1.60% 26-Mar-20 01-May-20
888 Hldgs Special 1.555p(2c)(E) £1.08 1.40% 26-Mar-20 21-May-20
Value & Income Trust plc Quarterly 2.9p £2.43 1.20% 26-Mar-20 24-Apr-20
TR European Growth Trust plc Interim 7.8p £8.75 0.90% 26-Mar-20 17-Apr-20
Volution Group Plc Interim 1.7p(E) £2.10 0.80% 26-Mar-20 30-Apr-20

 

US close: Stocks finish higher as central banks pile on the stimulation

Shares on Wall Street finished higher on Thursday, helped by the latest moves from authorities to offset the fallout from the Covid-19 coronavirus pandemic, and the immediate effect of efforts to contain it.

The Dow Jones Industrial Average closed up 0.95% at 20,087.19, the S&P 500 added 0.47% to 2,409.39, and the Nasdaq Composite rose 2.3% to 7,150.58.

At an emergency meeting overnight, the US Federal Reserve announced measures to avoid a run on money market mutual funds, followed on Thursday morning by an announcement from the Department of Energy that it would purchase 30 million barrels of American oil by 26 March.

Financial markets were also waiting on news of Congress’s eagerly anticipated fiscal stimulus plans to help shore up the economy, even as economist forecasts continue to come down.

On Thursday morning, analysts at Bank of America Securities marked down their projection for global GDP growth in 2020 to 0%, which would match the “major” recession experience in 1982 and 2009.

“The evolving news on Covid-19 has triggered ‘forecast leapfrogging,’ with economists and strategists repeatedly lowering their forecasts,” Bank of America said in a research note sent to clients.

“Here we take a big leap, as we try to make our forecast robust to the near-term news flow.”

The yield on the benchmark 10-year US Treasury note was down almost 14 basis points at 1.121%, while the two-year note fell 10.5 basis points to 0.417%, amid speculation the Fed could further ramp-up its quantitative easing.

Congress, meanwhile, was expected to unveil a package of stimulus measures worth roughly $1.3trn, with Treasury Secretary Steven Mnuchin saying he was in support of some of that money going towards a $1,000 cash payment to every American citizen.

Nonetheless, the latest batch of economic data still made for grim reading.

According to the Department of Labor, initial jobless claims increased by 70,000 over the week ending on 14 March to reach 281,000, as the virus disrupted activity across the accommodation, food and transportation sectors, which was far worse than consensus expectations for 225,000.

Factory sector activity also weakened “significantly”, with the Philadelphia Federal Reserve’s manufacturing gauge plummeting by 49.4 points between February and March to reach -12.7, which was its biggest fall for a single month since 2012.

In equities, bulk retailer BJ’s Wholesale Club was down 13.04% even as Americans took to panic buying household essentials, while Ford Motor Company slipped 0.66% after it withdrew its 2020 guidance and suspended its dividend in a bid to shore up cash.

On the upside, Tesla was ahead 18.38% after analysts at Morgan Stanley upgraded the stock, given it had the necessary liquidity to weather the coronavirus storm.

Sports equipment retailer Dick’s Sporting Goods was 12.39% firmer, even as it said customer numbers had plunged and it was closing its stores for the next fortnight.

 

Friday newspaper round-up: Mortgage holiday, food retailers, BP

Mortgage holders clamouring to obtain a “payment holiday” during the coronavirus crisis are waiting hours to get through to Britain’s banks, and many have given up. Twitter has been deluged with complaints from customers unable to speak to someone at their bank. Some claimed they were waiting for as long as three and a half hours. Many expressed their anger at the lack of a simple online form that could be used to request a payment holiday. – Guardian

Food retailers are drafting in an army of coronavirus temps to “feed the nation” as worried shoppers continue to panic-buy groceries. With millions of jobs at risk as whole sectors of the economy close down, besieged food stores, including Asda, Tesco, Co-op and Iceland, are creating thousands of temporary jobs in a bid to keep their shelves full. – Guardian

Massive layoffs across Britain’s manufacturing sector will come within days without immediate action to ease a cash crisis as orders collapse. Industry leaders are meeting with ministers on Thursday to ask for relief on VAT, PAYE and National Insurance bills. One source said: “We’ve been hearing from companies since the start of the week warning that they can’t go on but the situation has ramped up suddenly in the past few days. – Telegraph

BP is slashing the number of its staff working in the North Sea as it fights to prevent coronavirus outbreaks on oil rigs. The business is reshuffling its 1,175 crew members in the region in a bid to maintain safe and steady operations and keep crude oil flowing. – Telegraph

Investors have suffered a dividend hit of at least £600 million as some of Britain’s biggest businesses race to conserve cash in the coronavirus crisis. About 20 companies have cut or delayed dividends in recent weeks, including pub and restaurant chains, bookmakers and software companies. About half a dozen firms moved to halt dividends yesterday, while Next and National Express put their payouts under review. – The Times

 

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