Stock markets slide after flurry of poor data - as it happened

Graeme Wearden

from on 2020-04-24 16:01 (#52KH8)

Rolling coverage of the latest economic and financial news, as the Covid-19 lockdown hits spending in UK shops and confidence among German firms

Latest: US durable goods and consumer confidence fall
German business confidence hits record low
UK retail sales slumped 5.1% last month
Coronavirus - latest updates
See all our coronavirus coverage

5.01pm BST

Finally, European stock markets have all closed lower tonight, as investors continue to worry about the scale of the Covid-19 lockdown.

A late flurry of selling has sent all the indices deeper into the red, with the Stoxx 600 losing 1.3% today -- leaving it down 1.2% for the week.

Stocks markets are in the red as traders are a little downbeat on account of the lack of progress in relation to an EU rescue package, as well as the disappointing results for a potential Covid-19 treatment. European leaders are divided about the size of the financial package. There are even deeper divisions over what portion of the scheme will be grants, and what portion will be loans. Broadly speaking, southern European economies are calling for grants, while the northern members are keen on loans. The lingering division is hanging over sentiment.

Hopes for a potential Covid-19 treatment were running high this day last week, as Remdesivir, an antiviral drug produced by Gilead Sciences, was reported to have helped patients with fever and respiratory problems. Those hopes were dashed when a medical trial in China said the drug was unsuccessful. When it comes to the pharma industry, there is usually a lot of trial and error, so I doubt we have heard the last about a potential treatment for the coronavirus.

5.00pm BST

In another example of retail gloom, Debenhams is to permanently close four more stores with the loss of 239 jobs after failing to reach agreements with landlords.

4.41pm BST

Behind the charts, graphs and numbers which make up economic data are real stories of human misery.

And that includes the sad news that more than 200 Oasis and Warehouse head office staff have been left struggling for cash after being laid off a fortnight before pay day.

"I felt complete shock. We had no idea the company was in financial difficulties. We had hoped we might be furloughed. We're all in a tricky situation.

There are no jobs for us to go to and some people were on maternity leave or pregnant so they are really stuck."

4.04pm BST

There's time for some late pessimism too.

Barclays has slashed its economic forecasts for the UK. It now expects the economy to shrink by 8% this year, which would be the worst recession in decades.

A longer lock down, policy frictions and a less favourable global backdrop lead us to cut our forecasts for the UK. We now expect 2020 GDP to drop 8% and remain 4% below pre-virus trend by end 2021. We see unemployment peaking near 9% in Q2 20, the budget deficit ballooning to 10.8% of GDP and the debt-GDP ratio above 100%.

4.00pm BST

Some late UK news... high street chain JD Sports has decided not to pay a final dividend to shareholders this year, due to the Covid-19 crisis.

Its board and senior management team are all taking voluntary pay cuts of at least 25% "for the current period of disruption", with executive chairman Peter Cowgill giving up 75%. More here.

3.19pm BST

Today's fall means that US consumer confidence is now around its lowest since the end of 2011:

Michigan Consumer Sentiment: April Final Mostly Unchanged https://t.co/R2pJ58IgbA pic.twitter.com/IGL3sYUG9z

3.10pm BST

The bad economic news keeps coming today.

The latest blow is that US consumer sentiment has fallen sharply this month, for the third month running.

US consumer sentiment fell for a third straight month as people weigh the coronavirus pandemic and the possibility of an economic re-opening, data by the University of Michigan showshttps://t.co/LJLJcmXSaP

2.58pm BST

Alarmingly, the slump in US durable goods orders last month is worse than during the 2008-09 crisis.

Orders for durable goods sank 14.4% in March as the coronavirus swept the country. The steep drop was the second biggest since the government began keeping track in the early 1990s. Orders never even fell that much during the 2007-2009 Great Recession. https://t.co/S4dYeeV3wU pic.twitter.com/iQSwiU3wVc

2.47pm BST

Back in the UK, the competition watchdog has warned it will set out measures to tackle concerns about refunds and cancellations in the travel industry after a surge in complaints.

The Competition and Markets Authority said four in five complaints to its coronavirus taskforce related to refunds and cancellations.

2.42pm BST

Wall Street is shrugging off today's hotpot of dire economic data.

The Dow Jones industrial average has gained 0.4% in early trading, up 102 points at 23,617.

2.08pm BST

This is the worst slump in US durable goods orders since 2014.

It's mainly due to a huge drop in demand for civilian aircraft.

U.S. orders for durable goods declined in March by the most since 2014 as the coronavirus and slumping oil prices reverberated through the manufacturing sector https://t.co/ReoPjkHhHa

1.38pm BST

Newsflash: Orders for US durable goods have tumbled sharply, adding to the growing chorus of grim economic news.

Orders for heavy-duty machinery, electronics devices, transport equipment and the like fell by 14.4% in March, new figures from the Commerce Department show.

USD Durable Goods Orders (MAR P),
Actual: -14.4%
Expected: -12.0%
Previous: 1.1%https://t.co/J10jkIS51r

U.S. durable-goods orders drop 14.4% in March at start of pandemic

1.02pm BST

Bloomberg reckons Germany's economic gloom will continue for some time, judging by today's tumble in confidence:

The Ifo Institute's index dropped to a record-low 74.3, well below economists' median estimate.

Reduced spending power from millions of furloughed workers and the persistence of the coronavirus pandemic in some of Germany's largest trading destinations are set to weigh on business for some time to come -- with a gauge for expectations down more than 10 points.

"Sentiment at German companies is catastrophic... Companies have never been so pessimistic about the coming months"

Ifo President Clemens Fuesthttps://t.co/sRfcmMcDF7 pic.twitter.com/Ysxs1wcjLJ

12.48pm BST

As lunch approaches, Europe's stock markets are still slightly lower today.

The FTSE 100 is down 23.8% so far this year. Across the index, 41 stocks have managed to outperform the market, eight of whom have actually delivered positive returns this year. These include precious metals miner Polymetal up 42.7% and grocery expert Ocado up 26.5%.

"Investing in gold, food, water, medicine and household goods seem to have been the winning trades through this crisis,"

12.35pm BST

McDonald is helping the UK's drive to get essential workers tested for Covid-19.

The fast food chain has handed over use of its drive thru restaurant in Meridian Business Park in Leicester for use by DHU Healthcare to test NHS workers for the virus.

DHU would like the thank @McDonaldsUK for allowing us to use their drive thru facility at Meridian business park, Leicester, enabling us to provide COVID-19 swabbing for frontline NHS staff (by appointment only) pic.twitter.com/h9FItBGS0h

12.13pm BST

Here's a handy chart showing how Germany business confidence took an almighty tumble today:

OUCH! German Business Confidence plummets further as lockdowns persist. Ifo business confidence sinks to 74.3 in Apr from 85.9 in March and vs 79.7 expected, and way below 2008/2009 levels. Expectations drop to 69.4 from 79.5 in March. Current conditions at 79.5 vs 92.9 in March. pic.twitter.com/WmOfNvFGJi

12.02pm BST

One German government source has told Reuters that they expect GDP to shrink by 6% during 2020 - which would be the worst since the second world war.

Reuters explains:

The economy will rebound from the coronavirus pandemic in 2021 with growth of more than 5%, the source added.

Spiegel magazine reported the figures first, citing an Economy Ministry forecast to be unveiled next week.

11.50am BST

London Gatwick says it does not expect passengers to come back to pre-Covid levels for another four years.

"We're determined to keep Gatwick open so as and when airlines can fly again we can immediately ramp up."

10.51am BST

With less being spent in the shops, restaurants and cinemas closed, and sporting events on hold, some people are going to inadvertently end up saving money.

So says the CEBR thinktank today. It has calculated that household spending will fall by 30% during the lockdown. So even allowing for wage cuts to furloughed workers, and a rise in job cuts, savings will rise.

"As shown in today's retail sales figures, many people are cutting back on their spending amid the coronavirus crisis, due to shops being closed as well as economic uncertainty prompting many to save. Cebr has estimated that during the lockdown, total household spending will be 30% lower than what it was before the crisis.

Therefore, despite falling incomes due to wage cuts and rising unemployment, the amount households save each month is expected to be 130% higher under lockdown than before the crisis."

10.38am BST

Here's our full story on drop in retail sales, despite that strong demand for food and alcohol.

10.08am BST

Economists have been chewing through today's UK retail sales report.

The CBI's Alpesh Paleja shows how food shops have been busier than ever, but non-food shops were rocked by the lockdown:

Retail sales pretty much as you'd expect for March (sharpest m/m fall on record). Big divergence between food and non-food sales growth

Disclaimer: all charts just look mental right now pic.twitter.com/KvynDDvKSk

Behind the ai (-5.1% MoM) in UK retail sales, a big ai in online to 22.3% with April set show further increases. Sunk costs spent by consumers & businesses over this period to build online accounts/ capacity means part of this shift will likely persistent after COVID-19 passes pic.twitter.com/7QKTavIrZh

9.57am BST

IFO have also warned that Germany faces its toughest economic challenge since reunification 30 years ago.

They don't expect a V-shaped recovery either.

GERMAN IFO ECONOMIST SAYS GERMAN ECONOMY IS IN TOUGHEST TIME SINCE REUNIFICATION

GERMAN IFO SAYS SENTIMENT AT GERMAN COMPANIES IS CATASTROPHIC

GERMAN IFO ECONOMIST SAYS THERE WILL LIKELY BE NO V-SHAPED RECOVERY

9.37am BST

Business optimism in Germany has suffered a record slump, as the coronavirus pandemic rocks Europe's largest economy.

The monthly IFO survey of German business morale has slumped to 74.3, from 85.9 in March.

"The coronavirus crisis is striking the German economy with full fury."

#GERMANY APR IFO BUSINESS CLIMATE: 74.3 (record low) V 79.7E; CURRENT ASSESSMENT SURVEY: 79.5 (lowest since July 2009) V 80.5E
- Expectations Survey: 69.4 (record low) v 75.0e pic.twitter.com/bQsHqkgNlD

#Germany's #Ifo Index dropped to 74.3, suggesting -8% #GDP growth. pic.twitter.com/k7vjmfqkK9

9.24am BST

Karen Johnson, head of retail & wholesale at Barclays Corporate Banking, sees some green shoots amid the slump in UK retail sales.

"March was a watershed month for UK retail. As the lockdown came into full effect and many high street businesses closed their doors to customers, sales were down across the board - with the second half of March showing a particularly sharp drop.

"Although the headline figures were expected, there have been some glimmers of hope amongst the shutdown, with spend on food and drink a notable (if not unexpected) area of success. Whilst most 'bricks and mortar' retailers have seen walk-in demand disappear, early indications are that online spending has also performed better than predicted - showing that consumer spend has not closed down entirely."

9.17am BST

With demand for luxury clothing down, Burberry has turned its hand to producing personal protective equipment for NHS staff.

Our trench coat factory in Castleford is now manufacturing non-surgical gowns and supplying them to the UK National Health Service. We are also sourcing surgical masks through our supply chain and supplying them to the NHS and charities such as Marie Curie, which provides nursing care for families living with terminal illness in the UK. To date, we have donated more than 100,000 pieces of PPE.

9.00am BST

UK housebuilder Persimmon says it will resume work next week, a month after suspending operations to comply with the lockdown.

It says it has "developed and tested a range of new site protocols" to enable work to restart next week, telling shareholders:

The Group is therefore announcing today that it will begin a phased re-opening of its construction sites from the morning of Monday 27 April 2020 which will allow us to support our customers by completing the construction of the new homes they have purchased in a safe and responsible manner.

8.53am BST

The tumble in retail sales last month is another reminder of the economic cost of the lockdown.

Yesterday we learned that activity at Britain's factories and offices is shrinking extremely fast, with the Bank of England warning of the worst contraction in at least a century.

"I will not allow for changes to be made that are unsafe. We've got to keep the public safe. And I understand the economic pressures, that is my background and I care deeply about that.

"I understand those voices who are saying that we should move sooner, but that is not something we're going to do. We're going to move when it is safe to do so."

8.43am BST

Away from retail, Pearson is to pay its 100m final dividend for 2019 to investors and says it will not need to furlough any staff as the global learning company weathers the coronavirus.

John Fallon, the outgoing chief executive of the FTSE100 company, said that the company's transition to e-learning meant that it was well-positioned for a post-coronavirus world with increased social distancing and remote learning.

"When the threat of the pandemic eventually eases, it will be even clearer that the future of learning is increasingly digital."

Pearson pays its 100m final dividend for 2019 and says it won't need to furlough any staff during coronavirus crisis.

8.27am BST

European stock markets have dropped opened lower, with the FTSE 100 shedding 77 points or 1.3% to 5748.

Disappointment that Gilead's Remdesivir drug has apparently failed a Covid-19 test has dampened investors' mood, with the European-wide Stoxx 600 index down 1%.

Economists are dealing with three levels of uncertainty. Uncertainty about the virus. Uncertainty about the policy response. Uncertainty about the economic response to the virus and to policy. Changes in any one of those change economic outcomes. Reports of poor test results for a possible treatment weakened risk markets somewhat.

US President Trump's suggestion that injecting disinfectant or bright lights be investigated did not reverse that weakness.

8.20am BST

Although online shopping hit a record high last month (as a share of all shopping), it still only made up less than a quarter of spending (22.3%).

Lisa Hooker, consumer markets leader at PwC, reckons retailers are struggling to cope with demand (a familiar tale for anyone who tried to book a supermarket delivery slot):

With the high street locked down in the second half of the month, online sales did make up some of the slack with growth of 12.5% compared to last March.

However, with only a 20% rise in online grocery sales despite the Prime Minister encouraging us to 'use food delivery services where you can', this suggests that operators are hampered by limited capacity in the face of increased demand, and this number could have been even higher.

8.09am BST

The record drop in UK retail sales last month shows that consumption is falling fast under the lockdown, says Thomas Pugh of Capital Economics:

At one end, there were clear signs the pandemic was keeping consumers away from the high street, non-food sales excluding petrol and online sales were down by 19.4% m/m, with an especially sharp 34.8% m/m fall in clothing sales. And petrol sales declined by 18.9% m/m. Department store sales did rise by 2.8% m/m, but appears to be due to purchases of food and other items online.

On the other hand, food & drink sales were up 10.4% m/m (within that alcohol 31.4%!) and online sales (non-department store) rose by 5.9% m/m, as consumers were locked down at home.

"The March retail sales data shows a sharp decline month on month. However, the real story will be seen in April's figures when the lock-down will be fully felt by retailers.

Here we expect to see dire numbers, but it must be balanced up by very strong online sales, which we expect will be showing growth in excess of 50% year on year. There have been clear winners and losers and we think this will only become more apparent the longer the crisis continues."

"While the January retail sales data showed signs of the Boris Bounce, the March data reflected the Covid-19 collapse.

"Unsurprisingly, food stores performed well in March and more people than ever started to buy online.

Disappointing UK retail sales for March - could have been much worse but for big rise in food, household goods and alcohol sales.

Suggests April retail sales may be worse as spending patterns level out.

We won't be buying as much toilet roll for a start..

7.57am BST

The record tumble in UK retail sales last month is clearly visible in this chart:

7.45am BST

Retail sales across the UK have fallen at a record pace under the lockdown, but demand for alcohol has soared.

The latest retail sales figures, just released, show that monthly retail sales volume fell by 5.1% in March.

UK retail sales figures show alcohol sales grew by 32.6% in March. That's how we're we getting through this; it's a sloshdown more than a lockdown

Comments from food store retailers suggested that panic buying, or stockpiling during the coronavirus (COVID-19) pandemic, was a big factor in the increased sales, particularly for supermarkets (Table 3). Store closures were a reason provided by smaller food stores for reduced sales, although a small number did diversify with delivery-only orders.

Online sales as a proportion of all retailing reached a record high of 22.3% in March 2020 as consumers switched to online purchasing following the pandemic.

7.25am BST

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

Stock markets are ending the week on the back foot as pessimism over the coronavirus outbreak rises.

The US stock markets closed Thursday's session flat, while Gilead shares tumbled past 4% after the company's Covid-19 drug remdesivir gave poor clinical results in a Chinese trial according to the Financial Times report based on accidentally released draft documents by the World Health Organization.

New cases in Europe seem to be on a falling trend as attention turns toward the winding down of the economic shutdowns across the continent. But news is mixed in the US, with reports pointing at significantly higher contagion numbers in New York compared with the official counts. Fatalities in California rose the most during the last 24 hours.

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