FTSE 100 suffers worst quarter since 1987 as Covid-19 recession looms - as it happened

Graeme Wearden

from on 2020-03-31 18:47 (#51FYP)

Britain's stock market has posted its biggest quarterly slump since Black Monday, as the coronavirus forces UK into a deep recession

Earlier:

Introduction: Chinese PMIs show economy strengthening
Composite PMI surged to 53, from 28.9, showing growth
Coronavirus - latest updates
See all our coronavirus coverage

9.23pm BST

A late update from Wall Street, where the S&P 500 has closed 1.6% lower tonight.

What felt like the longest Q1 ever, closes with the S&P 500 down 20%. The biggest quarterly drop since Q4 2008. pic.twitter.com/apMld29Qev

7.47pm BST

And finally, here's our news story on the financial markets' dire start to 2020:

7.46pm BST

One late development...JD Sports has become the latest store chain to stop paying rent to its landlords.

It's another sign that the high street lockdown has a devastating impact on fashion retailers.

JD confirmed that it had not paid the quarterly rent for its 390 UK stores which was due last week. The retailer is understood to be in discussions with its landlords about the next bill, which is due in June.

Last week, the value fashion chain Primark refused to pay 33m in rent after the closure of its UK stores due to the coronavirus outbreak.

7.32pm BST

Despite the recent easing of market jitters, investors should be cautious about the months ahead. Optimism that the Covid-19 crisis will soon be over could be badly misplaced.

So writes my colleague Nils Pratley tonight:

The rapid bounce-back theory rests on the idea that lockdowns will last only two or three months, at most, with no need to reimpose them.

Perhaps that will be accurate but, remember, the investment consensus eight weeks ago was that Covid-19 was mainly a China-only affair and would be over quickly. Projections have been made to look very silly very quickly in this crisis. It is why little should be read into Tuesday's better-than-expected survey of business confidence in China: one unreliable piece of data does not imply a lasting rebound.

7.28pm BST

Back on Wall Street, stocks have turned lower again.

The Dow's currently down 191 points, or almost 0.9%, having been up 0.5% earlier.

After the last few weeks of mayhem, these markets are dreadfully quiet pic.twitter.com/argWbANzdp

6.42pm BST

FTSE 100-listed cruise operator Carnival has had a rotten quarter, down 73%.

And today, it admitted that it never recover after the coronavirus pandemic, as it sought needs $6bn (4.8bn) in new funding.

6.36pm BST

Italy's main stock index suffered its worst quarter on record, and its worst month too, Reuters reports.

The FTSE MIB sank by 27% in the first three months of this year, and by 22% in March alone - as Rome was forced to impose ever-more-stringent lockdown rules in an attempt to slow the spread of Covid-19.

6.20pm BST

The FTSE 250 index of medium-sized, UK-focused companies had an even worse quarter!

It fell 31% in Q1, dragged down by UK retailers, transport firms, property groups and pub chains badly hit by the Covid-19 crisis

The numbers are in...
Second-worst quarter for FTSE 100: -25pc
Worst-ever quarter for the FTSE 250: -31pc https://t.co/0XX1WndkJt

6.17pm BST

In other banking news, Barclays is offering to pay staff triple their usual wage, if they'll help deal with the surge in requests for mortgage holidays and emergency loans.

6.09pm BST

Monzo's chief executive Tom Blomfield has told staff that he will be waiving his salary for the year, making him the first boss of a digital bank (or any UK bank for that matter) to take a personal cut in light of the coronavirus crisis.

In a memo to staff, the digital challenger bank boss said senior managers and board members would also take a 25% cut.

5.53pm BST

Some small comfort for UK investors: it's worse in Brazil!

Brazilian stocks -35%, on course for biggest quarterly decline since 1986. Down 28% this month, worst month since Aug. 1998.

Brazilian real -22%, on for biggest quarterly depreciation since 2002 (third biggest since Real Plan launched in 1994). pic.twitter.com/pGF3RX8W53

5.52pm BST

Neil Wilson of Markets.com also reckons the markets are calming down a little, but that doesn't mean volatility is over....

March comes in like a lion and goes out like a lamb. One can often twist an old saying to fit one's narrative but in some ways that is indeed what we've seen in equity markets over the last month, although it depends on how you define roaring and bleating I suppose.

Despite a horrid quarter and a shocker of a month, there is something of relative calm descending on markets at the month-end. Call it exhaustion, but it is welcome respite from what has been about the worst bout of panic selling we have seen. Whilst the '08 and dotcom drawdowns were larger, it's the speed at which we saw equities sold off earlier this month which was truly remarkable.

5.41pm BST

The slump in UK shares this quarter was triggered by fears of a deep recession.

So it's worrying to hear that some companies can't access the emergency help which the British government is providing.

"We're pleased the government stepped into the fray with support for British business. Unfortunately the two programmes they've put in place will put firms like ourselves in a massive chasm of non-coverage.

"We're one of the few left that completely design, engineer and produce a British-made product in the UK

5.37pm BST

The pound has also had a bad quarter.

Sterling started 2020 at $1.32 vs the US dollar, on relief that Britain wouldn't crash out of the EU without a withdrawal agreement.

5.35pm BST

In March alone, the FTSE 100 sank by 14% - making it a really grim time for investors.

The Covid-19 stock market began in the last week of February, but really accelerated this month as the number of deaths and infections in Europe jumped.

5.18pm BST

The Stoxx 600, which includes the largest companies from across Europe, sank by just over 23% in the last quarter.

That's its worst performance since 2002.

5.05pm BST

This chart shows how the FTSE 100 index has just been through its worst slump since '87:

4.48pm BST

Newsflash: As feared, the FTSE 100 has just posted its worst quarter since autumn 1987.

The blue-chip index has just closed for the night at 5671 points (up 108 points, or 1.95% today).

4.42pm BST

Crazy action on the FTSE futs going into the auction today..

4.32pm BST

There was a sudden flurry of stock-buying in the final minute of today's session!

The FTSE 100 suddenly jumped, and was up exactly 100 points or 1.8% as the full-time whistle went. That lifts the index to 5663 points.

4.30pm BST

David Madden of CMC Markets reports that investors turned a little more bullish this afternoon:

The World Health Organisation said the situation in Europe might be nearing its peak, and that helped market sentiment. The number of Covid-19 related deaths in Spain jumped by more than 11% in the past 24 hours, and that underlines the severity of the situation. Continental stocks are showing small gains this afternoon, while the FTSE 100 is firmly in positive territory. The UK market's relatively large exposure to the natural resources sector has helped it stand-out against its eurozone counterparts.

The latest economic data from China paints a picture of a massive rebound in business activity in March. The manufacturing PMI and the non-manufacturing PMI readings were 52 and 52.3 respectively. Those figures are in stark contrast to the dreadful readings of 35.7 and 29.6 registered in February. It would appear that Beijing's tough response to the covid-19 crisis has paid off.

4.13pm BST

Investors in Europe are trying their hardest to end the quarter on a positive note.

The FTSE 100 is up 48 points or 0.9% in late trading, at 5612 points [still down over 25% this year].

As markets begin to move from March's bloody battleground to the April's troubled waters, the Western markets strained to push higher.

Tuesday saw sentiment boosted by a pair of strong - some would say suspiciously so - PMIs from China. Well, Wednesday will see Europe and the US faced with their own final manufacturing and services readings for March, with the potential for downward revisions from the flash figures once the final week of the month is taken into account.

4.08pm BST

As things stand, Wall Street is going to rack up its worst quarter since October-December 2008 (when the S&P 500 fell 22.5%).

3.48pm BST

Wall Street has made a choppy start to the final trading day of the quarter.

The S&P 500 and the Dow Jones industrial average initially dropped, but are now rallying slightly - with the Dow up 100 points or 0.45%.

3.37pm BST

European stock markets have suffered heavy losses this quarter too, with the Stoxx 600 index down over 23%.

That's would equal its worst quarter in over 17 years, going back to July-September 2002 (when it fell by 23.3%).

"There appears to be light at the end of the tunnel, but that's not to say this health crisis is completely done and dusted," said David Madden, an analyst at CMC Markets in London.

"There's probably a few traders saying, 'I know stocks are really cheap', but at the same time don't want to go in and buy just yet because the health crisis doesn't appear to be getting any better."

3.18pm BST

After more number-crunching, here's a chart showing the FTSE 100's worst, and best, quarters since 1984.

As you can see, the last three months have only been 'beaten' by Black Monday in October 1987:

3.05pm BST

The FTSE 100 wasn't alone, of course. All the world's stock markets suffered a torrid quarter, with Asia-Pacific stocks down roughly 20%.

As Bloomberg's David Ingles points out, both the size and the speed of this selloff has been extraordinary:

Almost time to put this quarter behind us. Asia down about 20% in first three months.

Worst-performing markets in the region:

1. Philippines -34%
2. India -32%
3. Thailand -31%
4. Vietnam -31%
5. Indonesia -30%

*As is usually the case, EMs tend to get this the hardest pic.twitter.com/QFf1yXGuFP

Comparing the 2020 market drawdown with the two most recent stock market routs:

2020: 30% at bottom (so far)
Dot-com + early 2000s recession: 50%
Global Financial Crisis: 60%

But the velocity of this current one was crazy.#COVID19 pic.twitter.com/eNMyhq9wRW

2.19pm BST

I've dug around in our Refinitiv terminal to find the FTSE 100's worst quarters since it was created in 1984

As you can see, the last three months are almost unprecedented:

1.42pm BST

Look away now, investors.

Britain's stock market is on track to post its worst quarter since 1987, and its second worst quarter ever, due to the financial panic caused by the coronavirus.

1.27pm BST

Time for a quick recap

China's economy has beaten expectations with a pick-up in growth this month. Manufacturing firms and service companies both reported that activity rose in March, after slumping by record amounts in February.

1.01pm BST

Britain is preparing to issue an astonishing amount of new government debt next month, to finance its emergency response to the Covid-19 crisis.

The UK's Debt Management Office plans to raise 45bn in total through government bond sales over the course of April.

...facilitate the government's immediate financing needs related to its interventions to support the economy through the period of disruption caused by COVID-19.

I'm pretty sure this really is unprecedented. UK Debt Management Office is planning to raise 45bn in debt issuance for the month of April alone, with four auctions a week. https://t.co/7atmwItxuQ

45billion the government has just announced it is going to raise in the coming month is by some distance record nominal gilt issuance (ie demand for lending to Government) according to this spreadsheet from DMOhttps://t.co/FUSTwR9afi

It's about 30bn more in April than planned at Budget earlier this month...

12.21pm BST

Lloyds has backed down amid fierce criticism of UK banks taking personal guarantees from SME bosses in return for loans during the Covid-19 crisis:

It says:

"We understand the challenges facing our customers at the moment and can confirm that, for the period of the Government CBILS scheme, for businesses that need support due to the Coronavirus outbreak, we will not seek personal guarantees for any new financing that we approve.

This applies to both our normal banking lending and customers who are eligible for the CBILS scheme."

12.12pm BST

The early rally has rather tailed off, as investors break for lunch ("Where do you fancy today, darling? "How about the kitchen?").

The FTSE 100 is still up, but only 33 points or 0.6% at 5598.

12.02pm BST

11.43am BST

The Resolution Foundation thinktank has produced a new report on the economic impact of Covid-19 in the UK, and it confirms that the economy has entered a very sharp downturn:

Early survey indicators of economic activity suggest that GDP is set to fall by 0.5 per cent this quarter (Q1) and by more than 2 per cent next quarter (Q2). If realised, that would be a steeper decline than seen during the 2008/09 financial crisis. pic.twitter.com/f82NbWeCx0

Non-survey measures point to the possibility of an even sharper slowdown in activity: For example, electricity demand on weekdays is now down by more than 20 per cent relative to the start of March. pic.twitter.com/yxQvqWtbXY

The slowdown in economic activity is having a profound effect on the labour market. Web searches for unemployment-related terms has skyrocketed, and suggests unemployment is rising faster than at any point in 2008/09. pic.twitter.com/InCAbHdEk9

Job vacancies have also fallen significantly. Vacancies scrapped from DWP's 'Find a job' website suggest new vacancies could be down by up to a third (though healthcare and retail/warehouse vacancies are rising). This is also consistent with a deep recession. pic.twitter.com/E6c0iwk6AV

We are also yet to see a marked fall in shipping traffic, in contrast to the more than 60 per cent fall in flights. We will continue to monitor these and other data in the coming weeks and update our analysis every Thursday. pic.twitter.com/2GGiGdT4rk

11.07am BST

Mihir Kapadia, the CEO of Sun Global Investments, is also cheered by the surprise jump in Chinese factory output this month:

"China has demonstrated that economies can bounce back into action if citizens comply to lockdowns for controlling the pandemic and flattening the curve.

The official Chinese PMI rebounded in March from last months record lows, surging back to 53 from a record low of 28.9 in February, Manufacturing rose to 52.0 from 35.7 and construction rose to 52.3.

While its an astounding 'V' shape recovery from China, the pandemic is far from over in Europe and now has established firmly in the United States.

We still have long months of battle as the US has just started dealing with it. Global economic growth and trade will continue to be affected until the disease is contained across the world. But as China shows, there is hope at the end of the tunnel."

10.38am BST

Asia-Pacific stock markets have just posted their worst quarter since the financial crisis more than a decade ago.

Thanks to the coronavirus, indices have suffered steep, double-digit losses.

Financial markets and investors have been left bruised and battered by one of the most brutal quarters on record for equities, but the last few sessions have indicated some tentative green shoots.

Italy is finally seeing progress in its fight against the coronavirus. Stefano Patuanelli, a member of the Italian senate, says people should prepare for the end of lockdown. Getting back to normal could be as hard as isolating in the first place, but recovery is not far off. There is light at the end of the tunnel you feel.

10.18am BST

Everyone copes with self-confinement in their own way. And some people have eased the experience with a drink, or two.

The 20% surge in grocery spending this month was partly driven by a 22% jump in alcohol sales, as the UK responded to the prospect of weeks stuck at home.

March the biggest month of UK grocery sales ever recorded, according to @Kantar #COVID19

Average household spent an extra 62.92 during the past four weeks

Food & drink items for store cupboards rose by 28%

Alcohol sales up by 22%, an additional 199 million in the past month

Over last 4wks alcohol sales jumped by 22%, an additional 199m of booze bought compared with normal March.
Store cupboard products & frozen rose by 28%.
Interesting stats by @Kantar, research firm which tracks supermarket sales

Also proof that online supermarkets completely failed to cope with vast surge in demand.
Only 14.6% of households received an online delivery in past 4 weeks, up from 13.8% in March 2019.

Booze sales alone are up by 22% year on year. Lots of virtual parties....or parties for one. Sainsbury's was the fastest growing of the traditional big four, followed by Tesco.

10.04am BST

Just in: Inflation across the eurozone slowed this month, mainly due to cheaper oil prices.

Statistics body Eurostat reports that consumer prices only rose by 0.7% year-on-year in March, down from 1.2% annual growth in February.

Euro area #inflation down to 0.7% in March 2020: food +2.4%, services +1.3%, other goods +0.5%, energy -4.3% - flash estimate https://t.co/Ae7l3Uj9Dj pic.twitter.com/JipoLH4QJN

9.52am BST

March was a grim time for investors, but a record month for the UK supermarkets.

Growth in #UK supermarket spend has been primarily driven by people making additional shopping trips and buying slightly more each: https://t.co/7pg8POr1Jk #grocerymarketshare pic.twitter.com/K3DFvRVttZ

9.45am BST

Germany's latest German jobless figure are out.... and they tell us disappointingly little.

The Federal Labor Office reports that German unemployment rose by 1,000 in March, to 2.267 million. But, the data only covers the days to March 12 - so it doesn't actually show the impact of the coronavirus shutdown.

9.24am BST

Back in the UK, the Covid-19 crisis has forced British Airways to suspend all flights from Gatwick, London's second biggest airport.

My colleague Julia Kollewe explains:

The move comes a day after easyJet grounded its entire fleet of aircraft for at least two months. Demand for travel has collapsed in recent weeks as many countries are in partial or full lockdown, forcing airlines to cancel thousands of flights.

BA, which is still running flights to and from Heathrow, said it would contact customers to discuss their options.

9.23am BST

The key message from today's Chinese PMI reports is that March was a rather better month than February.

Simon Rabinovitch of the Economist has tweeted that it's a mistake to assume everything is fixed, or to simply dismiss the data:

Big bounce in China's PMI in March.
For all those doubting its validity or, at the opposite end, declaring that the economy is enjoying a V-shaped rebound, you'd be advised to look at the statistics bureau's actual explanation.

Four key points: (1/) pic.twitter.com/ZH9mFHhQSv

-- PMI is extremely sensitive to short-term changes (asking companies whether business conditions are better or worse this month compared with last month);

-- March was clearly better than February, when the economy was in total lockdown (and when the PMI hit a historic low);

-- the economy is still under a lot of pressure and is not back to its pre-crisis state;

-- it normally takes at least three consecutive months of positive PMI readings to indicate that the economic trend has really improved.

Here are the explanations from the National Bureau of Statistics (in Chinese):
1. https://t.co/1ypdCzPj6H
2.https://t.co/DCN2nxFmCp

9.17am BST

Some of the companies most hit by the Covid-19 crisis are leading the stock markets risers today.

Engineering group Melrose, which issued a profits warning late yesterday, is leading the way (up 16%, having fallen 17% on Monday). Although it scrapped its dividend last night, Melrose also reported that its banks had waived a covenant on its debts, meaning it shouldn't face a financial crunch later this year.

8.44am BST

It's early days, but the FTSE 100 share index is on track for its 7th day of gains out of 9 sessions.

After a stronger finish in Europe on Monday, European stocks have jumped higher on the open again today. The mood in the market is showing signs of improving despite mixed headlines. With equities markets now moving higher for 4 of the past 5 sessions investors are debating whether there are grounds for a sustained move higher.

Chinese factory data overnight gave a flicker of hope that the world's second largest economy is firing back up, despite large parts of the world grinding to a halt. Comments by the WHO that the coronavirus outbreak in Europe may be approaching its peak is also boosting sentiment and comes as Italy sees the smallest number of new cases in two weeks.

8.32am BST

Back in the City, advertising giant WPP has become the latest major firm to scrap its dividend and slash executive pay due to Covid-19.

WPP also reported a slump in revenues from China earlier this year (so will be hoping that March's PMIs herald better luck ahead).

WPP makes 2bn coronavirus savings plan: halts share buyback and scraps dividend (1.1bn). Up to 800m in savings including hiring freeze, 20% pay cut for executive committee and no hotel, travel and awards show costs. Capex cut by 100m. Greater China revs fell 23% in Jan/Feb.

8.30am BST

Analysts at Danske Bank are also encouraged to see China's Purchasing Managers Index surge to 53 in March, from 28.9 in February (a quite astonishing rebound).

Very encouraging to see Chinese PMI rebounded back above 50 in March! Obviously, a 53 print does not make up for the very sharp contraction but it shows that GDP growth returns (i.e. GDP is rising again but is still below the pre-corona level) pic.twitter.com/Ac6a7k7iGN

The PMI says that the GDP level remains subdued compared to the pre-corona virus level but that GDP has been increasing moderately after China re-opened. That is probably true.

8.27am BST

European stock markets have opened strongly.

Investors are welcoming today's rise in China's factory activity, and the news that Trump and Putin have discussed the energy market.

"Covid-19 continues to put pressure on economies around the globe and these figures demonstrate the size of the challenge ahead. China found itself leading the way as the virus outbreak first took hold there.

It is still far too early to know either the full impact of the coronavirus or how long it will restrict growth, but governments around the world are keeping a watchful eye on China as it leads the way out of the pandemic.

8.19am BST

Crude oil prices are rallying this morning, after Donald Trump and Vladimir Putin discussed the energy market.

The US and Russian leaders held a call yesterday, which covered the oil price war triggered by Saudi Arabia this month, along with other issues (presumably Covid-19 came up?)

"President Trump and President Putin agreed on the importance of stability in global energy markets."

The leaders also discussed critical bilateral and global issues,"

8.11am BST

The jump in China's PMI survey is an encouraging sign, say economists and analysts - but it certainly doesn't mean the crisis is over.

Here's some early reaction:

Remarkable rebound in China manufacturing PMI albeit hard data will be the focal point pic.twitter.com/ZqNWSKNPnX

It would be brave to say #China has achieved the V-shaped economic recovery off the back of a rebound in the March #PMI, but it is an encouraging sign. Unfortunately, its probably not a template for the rest of the world. #coronavirus https://t.co/tIJws7d4ZF pic.twitter.com/VxhZiXvok4

Encouraging to see China PMI improves big times in March with manufacturing going above 50.

Though, too early and wrong to consider this a V-shape recovery as it's a m-o-m indicator, ie. telling conditions improved over the horrible Feb, doesnt tell if back to business as usual. pic.twitter.com/AVn3mkGJ42

China: Official PMI indicates expansion, but this merely shows recovery after the historical decline in Feb, while the economy remains vulnerable. Export order indices remained in the contraction zone. pic.twitter.com/Uqk8xAIQK4

8.07am BST

China's PMI figures look like a classic V-shaped recovery:

8.02am BST

China's statistics body also warns that the global coronavirus pandemic is hurting the world economy.

Zhao Qinghe, the NBS's senior statistician, says:

The epidemic is accelerating and spreading around the world, severely impacting global economic growth and trade.

"There is also pressure on China's epidemic control from incoming cases, so the recovery of economic growth and supply chains face new challenges."

7.44am BST

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

....reflects that more than half of the surveyed enterprises have resumed work and resumed production, better than last month, but it does not mean that China's economic operation has returned to normal".

The survey's sub-index of [China's] manufacturing production picked up to 54.1 in March from February's 27.8, while a reading of new orders rose to 52 from 29.3 a month earlier.

New export orders received by Chinese manufacturers ticked up to 46.4 from 28.7 in February, but were still mired in contraction.

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