Oasis and Warehouse fall into administration; US economy suffers in lockdown - as it happened

Graeme Wearden and Jasper Jolly

from on 2020-04-15 17:07 (#525T4)

America's manufacturers and retailers are hit hard by coronavirus shutdown, as retail sales also suffer record slump

US factories' worst month since WW2; retail sales in record slide
G20 agrees temporary debt relief for poorer nations
IMF warns government borrowing will surge
IEA: oil demand faces record slump
Profits slide at Goldman and Citi

6.07pm BST

Dire economic data appear to be filtering through to stock market investors, with Wall Street and European indices taking a tumble on Wednesday.

The FTSE 100 lost 3.3%. The S&P 500 benchmark of large US companies had lost 2.2% at the time of writing.

5.52pm BST

The payment of dividends and big salaries has been a big bone of contention during the coronavirus crisis. Now the Financial Times is reporting () that those companies that take bailouts will be banned from doing so.

It says that there will be restrictions on dividends, share buybacks and bonus payments, citing "an official document". It adds:

Bailed-out businesses are also forbidden to take "excessive risks" or even engage in "aggressive commercial expansion", says a document setting out amendments to the recent relaxation of state aid rules.

5.30pm BST

Some reactions to the Oasis and Warehouse administrations are coming in.

Remember, the companies could still be bought, although that will be cold comfort for the 202 workers made redundant today.

Deloitte: "COVID-19 has had a devastating effect on the retail industry and not least the Oasis Warehouse group. Despite management's best efforts over recent weeks, and significant interest from potential buyers, it has not been possible to save the business in its current form"

Oasis and Warehouse have battled on throughout difficult high street trading conditions, even posting record sales figures in 2019, but with the closure of stores and added strain of Covid-19 the administrators have been called in.

The rate that retail stores are plummeting into administration is alarming.

Looking forward, more high street brands will probably fail over the coming days, weeks and even months after Covid-19. Question is, who's next?

5.08pm BST

European markets have closed down even further, amid global worries about the extent of coronavirus recessions.

The FTSE 100 lost 3.3% to hit 5,597.65 points. That leaves it back where it was a week ago.

4.49pm BST

The retailers' brands will continue to trade online, says the Guardian's retail correspondent, Sarah Butler.

About 2,300 jobs are at risk in total across the company. Only about 300 of those staff will still be working during the lockdown.

Oasis and Warehouse have appointed administrators from Deloitte with 200 immediate redundancies and more than 1,800 further jobs at risk. Brands will continue to trade online while administrators consider options..

4.44pm BST

Oasis and Warehouse have been put into administration.

The fashion retailers will furlough 1,801 employees, while 202 will be made redundant, according to a statement from Deloitte, the administrators.

4.38pm BST

Some interesting points coming from parliament's Treasury committee, which is hearing from Bank of England deputy governor Sam Woods via video link.

On the story earlier about the slow takeup of the government's coronavirus loan schemes, Woods said that bank operational bottlenecks are the issue rather than any concerns about whether they have the capital to make hundreds of millions of pounds of new loans.

BOE DEPT. GOV. WOODS: BANKS HAVE ENOUGH CAPITAL TO MAKE GOVT. COVID-19 LOANS. ISSUES ARE OPERATIONAL BOTTLENECKS.

4.25pm BST

G20 finance ministers have agreed to suspend poorer countries' debt payments from 1 May until the end of the year, as they prepare for increased spending on healthcare systems during the coronavirus pandemic.

That's according to a communiqui(C) just issued.

The decision to suspend both principal repayments and interest payments affects all the International Development Association (IDA) countries that are currently on debt service to the International Monetary Fund and the World Bank, and all least developed countries as defined by the United Nations that are currently on any debt service to the IMF and the World Bank.

We support a time-bound suspension of debt service payments for the poorestcountries that request forbearance. We agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club.[...]

We call on private creditors, working through the Institute of International Finance, to participate in the initiative on comparable terms.

#BREAKING G20 nations agree to temporary halt to debt payments by world's poorest nations pic.twitter.com/ypwo5KJm8A

4.10pm BST

There has been a bit of an acceleration in the selloff on the FTSE 100 as we approach the close of trading.

The FTSE 100 is down by 3.1%, with only seven stocks gaining ground. The mid-cap FTSE 250 has lost 4.3%.

3.52pm BST

Ryanair chief executive Michael O'Leary thinks global flight volumes will recover quickly once coronavirus lockdowns ease - but with lower prices.

3.36pm BST

Aston Martin has extended its factory shutdowns by a week - perhaps unsurprisingly given the UK's continued lockdown.

Considering the current global and local position on suppliers and employees, the business is now extending this temporary suspension until Monday 27 April, subject to ongoing review of the changing circumstances.

The business will look to resume operations as soon as it is reasonable to do so.

3.28pm BST

If it looks bad in developed economies that will filter through to poorer nations around the world in the form of reduced demand. Here's one stark example:

3.09pm BST

More gloom! US homebuilder confidence has suffered its biggest one-month dive in its history.

That's a triple-dose of grim American economic data.

NAHB APRIL HOMEBUILDER INDEX PLUNGES BY RECORD 42 POINTS TO 30

2.53pm BST

Newsflash: US industrial production has suffered its largest slump since the aftermath of the second world war.

American industrial output, which covered factories, mines and utility companies, declined by 5.4% month-on-month in March - as the Covid-19 shutdown hit output extremely hard.

Total industrial production fell 5.4 percent in March, as the COVID-19 (coronavirus disease 2019) pandemic led many factories to suspend operations late in the month. Manufacturing output fell 6.3 percent; most major industries posted decreases, with the largest decline registered by motor vehicles and parts.

The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively.

Biggest IP drop since de-mobilization as WW2 wound down. pic.twitter.com/6iiOhvaAZU

US industrial production -5.4% w/ #manufacturing -6.3% in March as #CoronavirusPandemic led factories to suspend prod:
> both weakest since 1946
> durables plunged 9.1% with autos -28%
> utilities -3.9%
> mining -2.0%

> IP -5.5% y/y
> Manufacturing -6.6% y/y
> Will worsen in Apr pic.twitter.com/eSv3SLK3yW

2.44pm BST

Another sign that economic activity has plummeted:

Wow. Apple Maps data shows driving directions requests are down 63%. Transit down 81%. #demanddestruction pic.twitter.com/qFNg4O8Xpi

2.42pm BST

Wall Street has opened sharply lower, as anxiety over the Covid-19 recession hits stocks.

2.15pm BST

America's shopping malls and eateries have suffered their worst ever decline in sales, as the US lockdown hits retailers.

Retail sales across the US slumped by 8.7% in March, even worst than expected. It's the biggest monthly decline on record.

Coronavirus delivers record blow to US retail sales in March https://t.co/flmfbvzmUM .@CNBCnow #Retail #retailnews @SquawkStreet

US Retail Sales March 2020

-8.7% Total - largest decline in history
+26.9% grocery stores
-25.6% auto dealers
-17.2% gas stations
-50% clothing stores
-26.5% restaurants
-26.8% furniture stores
-23.3% sporting goods
-23.9% department stores

2.04pm BST

Government deficits are going to be huge this year, the IMF shows:

Some of these fiscal projections from the #IMF are astonishing. The US will run a budget deficit of 15.4% of GDP this year! For developed economies as a while, it'll be 10.7%. Emerging markets, with a 9.1% fiscal deficit, look frugal in comparison. pic.twitter.com/ONgwu2VlEQ

1.55pm BST

The IMF's message to governments facing a massive recession is clear -- spend what you need to, but keep the receipts, so we can tackle the costs later.

In times of pandemic, fiscal policy is key to save lives and protect people. Governments have to do whatever it takes. But they must make sure to keep the receipts. More in our #FiscalMonitor https://t.co/4yV6zroLRJ pic.twitter.com/cGwlqN9ppA

New: @IMFNews estimates fiscal hit from #COVID19 crisis:
direct fiscal costs: $3.3 trillion globally
public sector loans, equity injections: $1.8 trillion
guarantees and other contingent liabilities: $2.7 trillion
UK big in guarantees (chart is % of gdp) IF firms can get loans pic.twitter.com/ASix0uQYVq

According to new fiscal monitor by the @IMFNews, debt-to-GDP-ratio will raise dramatically in advanced countries in 2020:

: 252 %
: 200 %
: 155 %
: 135 %
: 131 %
: 115 %
: 113 %
: 95 %
: only 68 %

1.45pm BST

The IMF is also concerned that the coronavirus pandemic could cause fresh waves of social unrest.

The new fiscal monitor warns governments that there could be a public backlash if they mishandle Covid-19 - especially as social unrest was already on the rise.

In Ecuador, Haiti, and the Islamic Republic of Iran, protests started when the government announced an increase in fuel prices, while protests in France were related to reforms of the railway system and pensions, and planned fuel tax increases, among other factors.

In Sudan, a sharp increase in the price of bread and a shortage of fuel led to social unrest. In Lebanon, people took to the streets when the government announced the introduction of fees on internet-based calls, whereas in Chile, a small increase in public transport fares sparked social protests on much broader issues.

1.33pm BST

Newsflash: The International Monetary Fund has warned that the Covid-19 crisis will drive government debt steeply higher world wide.

In its new fiscal monitor, just released, the IMF outlines how the stimulus packages - and the lost tax revenues - will push borrowing up.

The human cost of the pandemic has intensified at an alarming rate, and the impact on output and public finances is projected to be massive.

The COVID-19 pandemic is assumed to have a large negative effect on economic activity. Consequently, government revenues, including customs, will fall as activity and trade decline. The experience of the global financial crisis and past epidemics suggests that revenues fall even more sharply than output, as people and firms struggle to comply with their tax obligations.

Moreover, spending on health and support to people, firms, and sectors is being ramped up to mitigate the health and economic effects of COVID-19. Fiscal positions in 2020, therefore, are set to become significantly more expansionary across all three country groups (advanced economies, emerging market and middle-income economies, and low-income developing countries) compared with the fiscal outturns at the end of 2019.

1.20pm BST

One of the world's biggest investors has threatened to vote against dividend payments and excessive pay for executives in light of the coronavirus outbreak.

The head of Federated Hermes's investment stewardship, Hans-Christoph Hirt, has written an open letter to chief executives warning it would "urge companies to strengthen their balance sheets and act in their long-term interest when making capital allocation decisions".

"The world will not be the same again - or at least, it should not be. We look forward to working with you on a more sustainable form of capitalism during this unprecedented time and post-crisis."

1.13pm BST

How cheap is oil right now? Really rather cheap indeed, as this tweet shows.

Good morning. Here's a list of things that cost more than a barrel of oil right now. https://t.co/qgH5Ya9MKu pic.twitter.com/0Znmt8fZrg

1.08pm BST

Hot on Goldman Sachs' heels come Citigroup, who have also reported that profits nearly halved last quarter.

Citi made $1.05 per share, down from $1.87.

Citigroup's first-quarter profit tumbles 46% as it sets aside more money for loan losses from @CNBC https://t.co/J6lQCl5xMW

12.57pm BST

More expert reaction to the oil slump - from Allianz's chief economist Mohamed El-Erian:

Despite the production cut, WTI #oil is back below $20
Illustrates #markets concern about declining demand
Also highlights the growing difference between asset classes that are supported by/or perceived to have the potential support of #Fed liquidity support...and those who don't pic.twitter.com/37nuhKiHpm

So, about that big oil deal Trump was, er , trumpeting: it's worked about as well as his other big diplomatic initiatives (anyone remember North Korea?) pic.twitter.com/havW4dr8y8

12.55pm BST

Just in: Wall Street Goldman Sachs has put aside almost an extra billion dollars to cover losses from Covid-19, and the oil price slump.

"As the world grapples with this terrible pandemic, we are extremely grateful for the professionalism of the healthcare specialists and other front-line workers who are bearing the greatest burden in the fight against the virus.

We are in awe of their courage and are doing our part to help communities and small businesses suffering from the economic impact of the crisis. I am enormously proud of the determination and dedication of the people of Goldman Sachs, who continue to serve our clients despite high market volatility.

The increase compared with the first quarter of 2019 was primarily due to significantly higher provisions related to corporate loans as a result of continued pressure in the energy sector and the impact of COVID-19 on the broader economic environment.

Goldman Sachs' allowance for credit losses was $3.20 billion https://t.co/wjdONm5ulG pic.twitter.com/81hHbqk3rp

12.22pm BST

After a rather gloomy morning, here's the situation.

"For 2021, the IMF looks for a V-shaped recovery. The financial markets, and especially government bond markets, are more circumspect. Bond yields in the major markets are at secular lows, and longer-term inflation expectations remain subdued. S&P earnings and profits expectations are being revised downward in the face of global demand weakness.

For what it is worth, we are skeptical of the V-shaped recovery hypothesis, simply because ending the lockdowns in the various countries will likely be a staggered process."

Oil dropping like a stone. Trump and OEPC+ must return back to the drawing board, and do it quickly. WTI now trading at $19.47. Energy stocks across the board slipping.

WTI crude oil futures fall below $20 a barrel as demand tumbles today (Apr. 15, 2020) - via https://t.co/NjtSzxxNhA pic.twitter.com/fCfR6puEiZ

12.10pm BST

11.46am BST

The Covid-19 crisis has forced packaging firm Smurfit Kappa and plumbing and heating supplier Ferguson to scrap their dividend payments today.

"Of the top 10 payers by actual size of distribution, Shell and BP have both offered trading statements which have emphasised how cuts to capital investment, cost reductions, asset disposals and fresh debt would provide ample liquidity. Shell suspended its buyback programme but neither firm even mentioned the dividends, to suggest Shell and BP seem determined to defend their planned payments.

"The only other one of the top 10 to offer a firm statement is Diageo which has confirmed payment of its interim dividend for the six months to December 2019.

11.45am BST

The opposition Labour Party is not impressed by today's Covid-19 rescue loan figures:

Ed Miliband, the new Shadow Business Secretary, is alarmed that only 6,020 firms have received support:

"These figures show that the CBIL scheme is simply not working well enough. We need change now. The Chancellor must move to a 100% guarantee of loans for smaller businesses as other countries have done. In this economic emergency, it is the right thing to do.

In the coming days, businesses are facing critical decisions about their future.

11.28am BST

While a government loan would be welcome, many businesses would also like to claim on their insurance to cover losses from the lockdown.

But there's bad news -- according to the Financial Conduct Authority, few firms are actually protected from this crisis.

10.50am BST

Back in the UK, British banks have issued a total of 6,020 loans worth 1.1bn through the much-criticised coronavirus business interruption loan scheme.

New figures show the banks have doubled the number of approved applications in just the last week, after a slow start.

10.37am BST

Here's more reaction to the slump in oil prices.

Economist Daniel McLaughlin says the markets are anticipating an even steeper recession (so even less demand for crude):

Oil keeps falling, WTI now back below a20, taking equities down as well. The IEA forecast 29mbd fall in April and 23mbd in q2. Consensus economic forecasts shifting to steeper near term plunge in global GDP but still expecting activity to rebound strongly, which may be wrong.

OIL: crash continues with a -2.8% smackdown towards $19 after President Pump and OPEC failed trump economic gravity pic.twitter.com/2nLdQ7P9BA

Global oil demand in April will drop to a level last seen 25 years ago. @IEA says that global crude oil storage is more than likely to fill up completely (~80% of capacity, which is typical maximum due to logistics) by June despite the OPEC+ production cuts | #OOTT

10.28am BST

Crumbs. The IEA also fears that oil producers could run out of places to store oil by this summer, unless demand picks up.

With demand expected to plunge by 9 million barrels per day this year (or 9%), the Agency suspects that tanks, ships and pipes could become stuffed with unwanted crude.

"Never before has the oil industry come this close to testing its logistics capacity to the limit."

"Never before has the oil industry come this close to testing its logistics capacity to the limit"

International Energy Agency https://t.co/vgJ1ikBN1F pic.twitter.com/HzFMvyySLV

10.14am BST

Ouch! International Energy Agency (IEA) executive director Fatih Birol has predicted that April could be the worst ever experienced by the oil industry.

Briefing reporters about the IEA's new forecasts, Birol explained:

"In a few years' time, when we look back on 2020 we may well see that it was the worst year in the history of global oil markets.

"During that terrible year, the second quarter may well have been the worst of the lot. During that quarter, April may well have been the worst month - it may go down as Black April in the history of the oil industry."

10.06am BST

Shares are continuing to dip on London, with the FTSE 100 down 2% and the smaller FTSE 250 index shedding 4% today.

There are some risers, though - online supermarket chain Ocado are up 4%, amid strong demand for grocery deliveries.

10.04am BST

The slump in oil prices is potentially disastrous news for America's shale oil industry.

Oils rigs across America's energy belt have fallen silent in recent weeks as crude demand has troughed, leading to heavy job losses. Many of those shale producers are deep in debt, and could default on those loans unless prices rises.

The fact is, if oil prices fail to go back above the $30 mark, the U.S. shale oil industry is going to find it tough to survive.

Donald Trump was proud that he forged a deal between Saudi Arabia and Russia, however, the president's only goal was to save the U.S. oil industry and its jobs. The Saudis and Russians are done with their production cuts, and it is highly unlikely that we will hear any more from them, even if prices stay at the current level.

9.45am BST

Newsflash: Oil has hit a new 18-year low.

The IEA's warning that global demand will fall to its lowest since 1995 in April has added to the gloom in the market - sending US crude reeling to just $19.20.

$19.20! Crude oil just took out the late March panic lows. Production can't be stopped and oil storage will be full in two months. Absolute scenes.

*WTI CRUDE OIL FALLS TO $19.20/BBL, LOWEST LEVEL SINCE 2002

call OPEC pic.twitter.com/ZImepTad9I

We just released @IEA's latest monthly Oil Market Report. The numbers are staggering.

Global oil demand is set to plunge by 29 mb/d in April. Even if lockdowns ease in 2nd half, we expect demand to drop by 9 mb/d in 2020, erasing years of growth.

aihttps://t.co/lZcV1nFMzJ pic.twitter.com/gdO5kM73EY

9.35am BST

Despite the Covid-19 lockdown, the UK government has blown the whistle for construction of the HS2 rail link to begin:

9.18am BST

European markets are falling deeper into the red this morning, as coronavirus recession fears swirl.

The FTSE 100 is now down 90 points, or 1.5%, at around 5,700 points - with similar losses in other markets.

The OBR says the UK economy could fall by 35% in the second quarter. Brutal for sure, but it also expects a very sharp bounce back. This puts it in the V-shaped recovery camp, which is an ever-decreasing circle. Charles Evans, the Chicago Fed president, said yesterday the US is in for a very sharp but hopefully short downturn.

Money managers are more pessimistic. According to Bank of America's latest Global Fund Manager Survey, just 15% see a V-shaped recovery. Over half (52%) see a U-shaped recovery, where the long line along the bottom stretches on for some time, perhaps years. A fifth (22%) see a W-shaped recovery - possibly sparked by a sharp bounce back and second or third wave of infections - and 7% see the dreaded L - a long depression like the 1930s and no real recovery. The biggest tail risk is a second wave of infections, which makes the speed at which you reopen economies key. My bet, for what it's worth, is WWW.

9.11am BST

Newsflash: Global oil demand is expected to fall by a record amount this year -- according to industry experts.

The International Energy Agency has predicted that demand will slump by 29 million barrels per day in April -- to levels last seen in 1995 -- as the Covid-19 lockdown hits demand extremely hard.

"By lowering the peak of the supply overhang and flattening the curve of the build-up in stocks, they help a complex system absorb the worst of this crisis.

"There is no feasible agreement that could cut supply by enough to offset such near-term demand losses. However, the past week's achievements are a solid start."

9.03am BST

This chart shows how Brent crude prices have been weakening for several days, back towards the 18-year lows hit last month.

8.53am BST

Leading City fund manager Jupiter has been buffeted by this year's market slump.

Jupiter has reported that its total assets under management [AUM] has fallen to 34.99bn, down from 42.83bn at the end of 2019.

So far this year, in common with the asset management industry as a whole, Jupiter has faced challenging market conditions, largely brought about by the global coronavirus (Covid-19) pandemic, which has had a significant adverse impact on the economy, global financial markets including asset values and, consequently, on our AUM.

During this volatile period, which has seen most asset classes experience significant falls in value, Jupiter's relative investment performance has strengthened, with 80% of AUM above median over three years, 75% in the top quartile.

8.47am BST

Shares in oil producers are dropping, with Royal Dutch Shell down 3.4% and BP off 2%.

But oil consumers are also having a bad morning. Budget airline easyJet is the top faller on the FTSE 100, down 7%, with IAG (which owns British Airways) down 6%).

8.35am BST

Oil's latest slump shows that concerns over "virus-driven demand destruction" are overshadowing the historic agreement between Opec and non-Opec members to cut supply, says Bloomberg.

Daniel Hynes, an analyst at Australia & New Zealand Banking Group, explains:

"This is a demand driven market at the moment and clearly lockdown measures across most of the world are keeping that under pressure.

"We expect to see prices remain relatively volatile."

Oil was anchored near $20 a barrel on lingering demand fears https://t.co/NkvtYE8iqi pic.twitter.com/Xa3HSx430E

8.08am BST

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

Anxiety over the Great Lockdown recession of 2020 is haunting markets, even though stocks have staged quite a recovery in recent weeks.

#Brent crude falls below $30 pic.twitter.com/gxindPoPQ2

DGCX BRENT CRUDE TURNS NEGATIVE, DOWN ABOUT 1.3% AT $29.21 A BARREL

News on how long and how deep the coronavirus-led recession should continue hitting the global headlines and sour the investor mood. The IMF warned yesterday that the economic recession which will follow the 'Great Lockdown' will be the steepest in a century, while the British Office for Budget Responsibility (OBR) said the UK's economy could contract as much as 35% in the second quarter of this year, the worst since 1956. Leading banks also expect over 30% decline in growth in developed economies in the second quarter and the numbers are perhaps not an exaggeration.

Under these circumstances, and with looming first quarter corporate earnings, recent gains we have seen in equity markets could be the calm before the storm. Investors could close their positions and run to safety in the blink of an eye. This explains why safe haven assets are curiously bid despite solid gains across global equities.

"Most of the analysts are asking - 'When will the economies return back to work?' - which we believe is the wrong question," said Boris Schlossberg, managing director of BK Asset Management, in a Tuesday note.

"The much more relevant question is - 'When will aggregate demand recover to pre-virus levels?' That is a much more difficult dilemma to assess given the massive damage done to consumer balance sheets."

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