UK banks warned: don't let Covid-19 destroy good firms - as it happened

Graeme Wearden (earlier) and Jasper Jolly

from on 2020-03-25 17:37 (#51720)

Rolling coverage of the latest economic and financial news, as Treasury and Bank of England demand support for British companies

UK bank bosses told to protect jobs
Markets rally...but German business morale slumps
Deal reached on $2tn coronavirus package
Coronavirus - latest updates
See all our coronavirus coverage

5.37pm GMT

Equity markets have risen in Europe and the US as investors await details of the $2tn stimulus agreed by Congress in Washington.

Here are some of the highlights of the day:

5.14pm GMT

Boris Johnson is doing his daily briefing on the coronavirus response.

You can follow that here:

5.06pm GMT

Markets have sold the rumour and bought the fact when it comes to recession warnings. With heavy falls behind when the toll of the virus became clear, investors are already looking forward to efforts to pull the economy out of the doldrums.

Yet the effects of the coronavirus outbreak are still in their early stages, as evidenced by the surge in the number of claimants of universal credit, the UK's benefits system. There was a 477,000 increase in new claims over the past nine day, according to Peter Schofield, a civil servant at the Department for Work and Pensions - 500% higher than the same period last year.

The unprecedented surge in new Universal Credit claims shows that the UK is already in the midst of an unemployment crisis.

The increase in claims is putting huge pressure on our social security system, and is driven by a huge hit to family incomes.

4.58pm GMT

It was the 13th best day ever for the FTSE 250 index of mid-cap companies.

The FTSE 250 gained 4.57% to reach 14,819.91 points.

4.53pm GMT

And there is the closing rush on the FTSE 100 again: it gained 4.45% today to close at 5,688.20 points.

That makes it the 19th best day in the FTSE 100's history (back to 1984). And that comes off the back of its second best day ever. These are quite extraordinary times.

4.43pm GMT

Lloyds, Britain's biggest high street bank, has granted mortgage holidays to more than 70,000 customers in a little over a week.

That's one of the first tallies we've seen since the chancellor announced that homeowners who came into financial trouble as a result of the outbreak would be given up to three months' relief on their payments.

4.37pm GMT

Markets have now closed in Europe for the day, and it looks like there was another late buying spree.

The FTSE 100's preliminary close shows it pushed to a 3.5% gain for the day, to break through 5,600 points - let's see if the closing auction can push it higher, as it did dramatically yesterday.

4.34pm GMT

More forecasts of recession for major economies: Moody's now predicts GDP will fall by 0.5% in the G20 economies in 2020, followed by a pick-up to 3.2% growth in 2021.

In November last year, before the emergence of the coronavirus, the agency was expecting G20 economies to grow by 2.6% in 2020.

The G20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021.

4.25pm GMT

JCB is suspending UK production until at least the end of April as a result of the coronavirus crisis, the company announced today.

These are certainly unprecedented times and none of us expected to find ourselves in this situation. In announcing that all those JCB colleagues asked not to work will receive 80% of their pay, we hope to remove any financial concerns that many people will undoubtedly have had.

4.15pm GMT

The Wall Street rally has picked up again: the Dow Jones industrial average has gained 3.2%.

It looks like it is Boeing that is driving the market. The plane maker is truly a stock market giant, and its shares are up by a whopping 33% today - although still only reaching levels last seen on 13 March.

4.01pm GMT

Choppy trading on the currency markets. Sterling lost another half a cent against the US dollar in the space of a few minutes, before roaring back to trade flat at the time of writing.

One pound will now buy $1.1765 - that's a fall of only 0.01% today. It's down by 0.44% against the euro today as well to trade at a1.0857.

These are unprecedented times. The pound is weaker now than at any point during the Brexit process, the 2008 financial crash, or 1992's Black Wednesday when speculators forced the government's hand in pulling the pound from the European Exchange Rate Mechanism.

First, the coronavirus pandemic has triggered a flight-to-safety. As is typical in times of economic turbulence, the US dollar attracts more buyers, in turn pulling down the price of sterling.

Second, investors are seeking liquidity and the most liquid assets of all are US Treasuries, which explains why dollars are always in demand.

3.35pm GMT

London city airport has announced it will close from this evening until 20 April at least, as the transport sector among the worst hit by the outbreak.

3.22pm GMT

Influential agency Moody's has downgraded its ratings for the debt of BMW and warned that cuts for other carmakers including Jaguar Land Rover could follow, as the coronavirus outbreak weighs on the automotive sector.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented.

The auto sector (and issuers within other sectors that relay on the auto sector) has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in the companies' credit profiles, including their exposure to final consumer demand for light vehicles have left them vulnerable to shifts in market sentiment in these unprecedented operating conditions and the companies remain vulnerable to the outbreak continuing to spread.

2.23pm GMT

Splat. The early Wall Street rally had fizzled out too, leaving the Dow flat and the S&P 500 down 0.9%.

2.21pm GMT

Uh oh.... the pound has lost its earlier gains, and is now down against the US dollar at $1.172, and the euro at a1.084.

2.18pm GMT

A US central bank chief has warned that unemployment will rocket, in the short term, as firms hunker down to help fight Covid-19.

St. Louis Federal Reserve president James Bullard said that around 46 million people currently due jobs with a 'high contact' with the public, so are at risk of layoff.

"They are people who are in some kind of occupation where they have interaction with the public and that is exactly what our health authorities say is not supposed to be occurring,"

1.57pm GMT

Nearly every member of the 30-strong Dow Jones industrial average is up in early trading.

Aircraft maker Boeing is leading the way, up 18%, thanks to the Senate's promise of $500bn in direct loan support to key industries such as aviation and aerospace.

1.41pm GMT

The US stock market is open (for electronic trading, anyway), and stocks are rallying.

Relief that lawmakers have agreed a $2trn stimulus package has pushed the Dow Jones industrial average up by over 2%, or 500 points -- adding to last night's 11% surge.

1.22pm GMT

Christopher Smart, Chief Global Strategist & Head of the Barings Investment Institute, reckons the US fiscal stimulus package is an important step.

It won't solve the economic crisis overnight, but it's better than watching the two sides on Capitol Hill tear pieces off each other:

"They say that you can't just throw money at a problem, but it certainly helps. Last week, the Fed did all it could to stabilise financing channels and to make sure that companies could borrow at reasonable rates in spite of the current health crisis. But access to cheap financing only goes so far when you don't have any revenues.

"In early reports, the fiscal package that looks like it's headed for passage seems to have exactly what businesses and households really need right now: loans, tax breaks and benefits that help replace lost revenues and family income. It probably won't be enough when all is said and done, but it's much better than nothing at all.

1.07pm GMT

Here's a breakdown of the stimulus package agreed (provisionally) by US lawmakers last night:

12.54pm GMT

Tomorrow we discover how many Americans lost their jobs last week, as the Covid-19 crisis stuck US firms. And it could be historically bad.

A week ago, the initial jobless claims figure jumped by 70,000, to 281,000 - a two-year high.

Unemployment estimates for tomorrow include Barclays at 2 million, BofA at 3 million and Citi at 4 million.

12.45pm GMT

Wall Street is currently said for a subdued open in 45 minutes, after the Dow's best day since the 1930s yesterday.

US Opening Calls:#DOW 20771 +0.45%#SPX 2429 -0.65%#NASDAQ 7499 -0.58%#RUSSELL 1084 -1.17%#FANG 2921 +0.61%#IGOpeningCall

12.40pm GMT

Obviously clothes are still needed, even in an era of home working.

But it's hard to believe that satisfying online orders for Next's t-shirts, blouses and kidswear is so essential that staff should be travelling to stores.. lured by a 20% pay rise.

High street fashion chain Next is offering staff a 20% boost to their pay if they turn up to stores on Wednesday, despite Government warnings to stay home.

The retailer is asking workers to travel to shuttered sites and pick clothes for online orders "to keep the company operating", according to a letter seen by the PA news agency.

NEW: Next is offering staff a 20% pay rise if they come into stores today to pick online clothes orders, despite Government shutdown. Next insist move is "entirely voluntary". Up now on @PA wires and here: https://t.co/x9B2nywJ7Z

Full letter sent to Next staff, seen by PA, published in full on the wires and below. Bosses say "We need to keep the online business functioning to be certain that Next emerges from this short-term crisis." https://t.co/7SHly5C2dQ

12.06pm GMT

Several UK manufacturers are ready to join the battle to create desperately needed ventilators, and are waiting for Westminster to pick which proposals to back.

My colleague Rob Davies explains:

Manufacturers including Airbus and Dyson are waiting for the government to give the green light to start producing medical ventilators, after separately finalising plans to make thousands needed to help the NHS fight Covid-19.

The proposals vary, with Dyson offering to design and build a new ventilator from scratch and a consortium called Ventilator Challenge UK, led by Airbus, planning to scale up production of existing models.

11.36am GMT

Global oil market prices may still be under pressure but the market price for a niche petrochemical used to make hand sanitisers has more than doubled to reach a new record high.

11.18am GMT

The CBI's latest survey of UK retailers is out....and confirms what we already knew: the public have been buying plenty of food, drink and essential household products, and not much else.

Grocers reported exceptionally strong growth in sales volumes in the year to March, as did specialist food and drink firms. However, most other sectors reported sharp falls in sales volumes, including clothing, furniture and 'other normal goods' (such as flowers, jewellery, cards etc).

Orders placed upon suppliers fell for the eleventh consecutive month, despite a strong rise in orders placed by grocers. Orders are expected to fall across most sectors in the year to April (including grocers), with expectations the weakest since April 2009.

11.10am GMT

Just in: The government has announced that estate agents, lettings agencies and bingo halls that have closed to help stop Covid-19 spreading will be now be exempted from business rates in 2020-21.

Chancellor Rishi Sunak says the move follows the crackdown on non-essential companies :

We are determined to do whatever it takes to support businesses during Covid-19, which is why we have extended business rates relief for the high street.

Today, I am removing some the exclusions for this relief, so that retail, leisure, and hospitality properties that have closed as a result of the measures announced by the Prime Minister in his statement on Monday will now be eligible for the relief.

11.05am GMT

As traders take a break for elevenses, the rally has officially fizzled out - with stocks now slightly lower in London and Frankfurt.

quite the ride today #DAX pic.twitter.com/5DDvb3tAnq

11.02am GMT

Barclays is extending measures for personal banking customers and is automatically waiving interest on all arranged overdrafts from 27 March to 30 April.

It has also set up an online form for mortgage holiday applications for customers in financial difficulty, to speed up the process.
Barclays managing director Fillean Dooney said:

"It's crucial we offer the right support to our customers through this challenging time. We have therefore decided to waive all overdraft interest until the end of April, meaning there will be no charges for customers to use their arranged overdraft.

We are reviewing all options to help customers after this time to ensure we support those in financial difficulty."

10.39am GMT

Back in the markets, the early soaraway rally is running out of gas.

The FTSE 100 is now only 38 points up, or 0.7% - having been 4% higher in early trading.

10.36am GMT

As well as help from their banks, UK businesses also want more clarity about whose actually allowed to stay open during the government's lockdown.

CBI director-general Carolyn Fairbairn has tweeted that many firms are confused by the guidance:

It's clear that many firms do not know whether to stay open or to close. I'm talking to the business secretary this morning to help government provide much greater clarity.

10.27am GMT

The list of UK businesses deemed vital at this time has been widened to include off-licenses - welcome news for those struggling to get through the Covid-19 crisis without a stiff drink.

Off-licences will join a list of businesses considered essential to keep the nation running, including supermarkets, pharmacies, banks and petrol stations.

10.12am GMT

All economic data are, to an extent, dated. But in the current climate, January's house price report is from another age.

But we should still note that UK house price growth slowed in January - to just 1.3% per year, from 1.7% in December. Prices shrank in the East and South East, but picked up elsewhere.

A long time ago. In a housing market far, far away... pic.twitter.com/LfDvfEQALo

10.05am GMT

UK bank chiefs have also been reminded to ensure that credit ratings aren't damaged by any 'flexibility' granted during this unprecedented time.

In other words, a company or individual shouldn't suffer any damage if they smash through their overdraft limit or delay a loan repayment, due to cashflow problems caused by the coronavirus.

NEW-

Letter from BoE and Chancellor stresses that banks should make sure 'flexibilities extended to customers... are recorded accurately so as
to prevent an adverse impact on a customer's credit file' https://t.co/jReJR0YfJV

9.51am GMT

Britain's banking sector has been given a clear warning this morning not to allow fundamentally viable companies to collapse because of the coronavirus crisis.

Rishi Sunak, the Chancellor of the Exchequer, Andrew Bailey, the Governor of the Bank of England, and Chris Woolard, the CEO of the FCA, have all written to the CEOs of the UK Banks on the subject of COVID-19 and bank lending.

The priority for all of us - banks, building societies, government and the financial authorities - should now be to take all action necessary to ensure that the benefits of the measures outlined above are passed through to businesses and consumers.

This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over.

9.22am GMT

While the markets rally, Germany business confidence has troughed to its lowest level since 2009.

The IFO survey of German business morale, just released, slumped to 86.1 this month from 96.0 in February. Such a sharp slump is confirmation that Germany is heading for a steep recession.

++EILMELDUNG++ #ifoGeschiftsklimaindex bricht ein - Der ifo Geschiftsklimaindex ist im Mirz auf 86,1 Punkte eingebrochen, nach 96,0 Punkten im Februar. Die deutsche Wirtschaft steht unter Schock. pic.twitter.com/Hy7FNLAP2U

"This is the steepest fall ever recorded since German reunification and the lowest value since July 2009.

The German economy is in shock.

GERMAN IFO ECONOMIST SAYS SENTIMENT HAS NEVER FALLEN AS STRONGLY AS THIS IN THE SERVICE SECTOR

I simply dont get why this is news to anyone. We have closed the economy, of course sentiment falls of a cliff.

Only thing that matters for markets now is the duration of lockdowns.

9.16am GMT

The pound is also rallying this morning, up 1.5 cents against the US dollar at $1.19 - its highest level this week.

It's also up nearly one eurocent at a1.099.

We think the actions of monetary and fiscal policymakers should help us prevent a Global Financial Crisis (GFC) style credit crunch. Tuesday's sharp equity rally shows that the combination of central banks' entire GFC playbook and substantial, direct fiscal support can be well received by markets."

9.06am GMT

The FTSE 250 index of medium-sized companies is also enjoying a good morning, up 5% at 14,935 points.

Pub chain Marstons has gained 30%, while bookmakers William Hill are up 25% -- two stocks badly hit by the government's isolation rules (you can't keep away from people at the bar or the bookies).

9.03am GMT

The rally is gathering pace!

After a hour of enthusiastic trading, the FTSE 100 index is now up 250 points or 4.6% at 5699 points (still the highest since 13 March).

8.46am GMT

With shares up sharply this week, some investors will be wondering if they should 'buy the dip' before it's too late.

Well, we certainly don't do investment advice here! But Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, has to make such calls... and he advises caution.

I hope that everyone's families, friends and businesses are weathering these difficult times well. Health is such a precious thing and it is all too easy for us to take it for granted, so in that respect the coronavirus is a jolt for us all as individuals as well as for global economies and markets.

As central bankers and governments unveil increasingly powerful measures to mitigate the economic and financial impact of the coronavirus outbreak, many investors are asking: is now the time to buy the dip in equities?

8.33am GMT

The FTSE 100 is still rising -- up 140 points or nearly 3%. That lifts it to its highest level since Friday 13 March.

That was the day after the worst session since 1987 (the index plunged over 10% in a thoroughly scary Thursday).

8.30am GMT

Fashion chain Burberry (+13%) and hotel group Whitbread (+12%) have also joined the top risers this morning.

They've both suffered badly from the Covid-crisis given their respective exposure to the Chinese luxury market and the UK domestic economy.

8.26am GMT

Shares across Europe are rallying this morning, pushing the Stoxx 600 index of leading companies up by over 2%:

8.07am GMT

Boom! The UK stock market has jumped at the start of trading, as investors cheer the overnight breakthrough over America's $2trn stimulus package.

The blue-chip FTSE 100 has surged by 1.85%, or 102 points - back to 5546 points. Retail chain JD Sports are the top riser, up 13%, followed by Barclays Bank (+9.3%) amd publishing and conference organiser Informa (+6%).

"The Senate's approval of the $2trn package should provide a positive lift to investors' moods in the near term, complementing the U.S. Federal Reserve's aggressive action in the past four weeks. This is particularly important given the aggressive fiscal stimulus from European and Asian governments in the past two weeks. The US government needs to be seen as not just counting on the Fed to do all the heavy lifting, especially when cutting rates and providing liquidity alone are not sufficient to help businesses and households to get through such tough times.

"The key question is whether these policies will be enough to facilitate a rebound once the virus is contained and shutdowns are removed. To answer this question we are following the employment data closely. If government policies prevent people from losing their jobs then a bounce back looks feasible. We are more confident that the stimulus policies put in place in Europe will adequately support employment. We suspect - and believe the jobless claims data out tomorrow will testify - that US unemployment is already on the rise which will prolong the period of weakness."

7.53am GMT

Recruitment firm Staffline reports that the UK jobs market has been changed dramatically, if maybe only temporarily, by Covid-19.

It told the City this morning....

There is a marked increase in demand in the food sector, including food processing, logistics and supermarkets....

Conversely, demand from other sectors such as retail, automotive and manufacturing has diminished considerably with the Group's limited exposure to white collar and permanent recruitment also impacted.

7.46am GMT

Pest control firm Rentokil has warned the City that the coronavirus is having a much deeper impact on its firm than previously thought.

Some customer sectors have been substantially closed due to government and voluntary actions taken to limit the impact of the virus. This includes the HORECA sector (Hotels, Restaurants and Catering), the airline industry, schools and some offices.

Conversely demand for our services in areas such as food production, food retailing and healthcare have been strong with increased demand.

7.36am GMT

Another flurry of UK companies are updating shareholders about the impact of Covid-19 on their business.

Persimmon, the house-builder, says its sales offices will close tomorrow "until further notice", with its construction sites now in an "orderly shutdown" (responding to UK rules on physical distancing)

7.27am GMT

European markets are on track to build on yesterday's strong gains:

European Opening Calls:#FTSE 5489 +0.79%#DAX 9873 +1.77%#CAC 4305 +1.46%#AEX 468 +1.38%#MIB 17036 +0.52%#IBEX 6839 +1.81%#OMX 1418 +2.48%#STOXX 2751 +1.33%#IGOpeningCall

It is worth noting that we still have very little visibility on what may happen in the weeks and months to come. With an almost certain worldwide recession looming, the virus-infected economic data will sour the mood practically on daily basis for at least the first half of the year.

In this respect, the preliminary PMI figures released yesterday were cataclysmic for most economies in March, with the services sector which accounts for an overwhelming majority of the developed economies taking an unprecedented hit due to a complete shutdown of activity.

7.14am GMT

NEWSFLASH: Inflation in the UK has fallen, given some support to households struggling to cope with the impact of Covid-19.

The Office for National Statistics reports that consumer prices in Britain rose by 1.7% in February, compared to a year before, down from 1.8% (a six-month high) a month ago.

7.06am GMT

Marketwatch say US lawmakers have agreed a "massive stimulus measure to try to keep Americans whole":

The package includes direct deposits for all Americans, $367 billion for loans to small businesses and an unprecedented program that will allocate $500 billion to the Treasury Department. Some of that money will be used to guarantee a Federal Reserve loan program for small and medium-size businesses. Larrry Kudlow, director of the White House's National Economic Council, said the funds could be leveraged into $4 trillion of lending through the Fed.

Most adults would receive direct payments of $1,200, while children would see $500 checks. Hospitals would receive some $150 billion under the deal and small businesses would get $367 billion in aid.

Senate Majority Leader Mitch McConnell described it as "a war-time level of investment for our nation," and said that the Senate would move to pass it later in the day on Wednesday.

The Senate will re-convene at noon. An exact time has not yet been set for the vote.The full details have yet to be released

Markets are putting faith in unprecedented intervention by governments around the world. Senior Senate Republicans and Democrats said late on Tuesday that they had agreed on the biggest congressional bailout in US history after the support package had twice been delayed by arguments over what to include.

Hopes of a jolt for the US economy drove the benchmark S&P 500 up 9.4% overnight, its biggest one-day gain since 2008. Futures markets pointed to a drop of 0.6 per cent for US stocks later when Wall Street opens but tipped the FTSE 100 to gain 1%.

6.53am GMT

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

After days of around-the-clock negotiations amongst senators and administration officials, a bipartisan compromise was struck over what is expected to be the largest US economic stimulus measure ever passed.

"We have a deal," said Eric Ueland, the White House legislative affairs director, just before 1am, adding that the text of the bill still needed to be completed. "We have either, clear, explicit legislative text reflecting all parties or we know exactly where we're going to land on legislative text as we continue to finish."

US Closing Prices:#DOW 20704.91 +11.37%#SPX 2447.33 +9.38%#NDX 7553.82 +7.81%#RTY 1096.54 +9.39%#VIX 61.67 +0.13%

Asia rides Wall St surge as investors place hopes on US stimulus. WH & Congress strike deal on a historic package that tees up $2tn in spending & tax breaks. European & US futures aided by US package as well. Bonds unch w/US 10y at 0.84%, 10y Bunds -0.33%, Gold 1614, Bitcoin 6.7k pic.twitter.com/ULnDNxck5x

Two ways it could easily all go pear-shaped is 1. The virus spread just gets out of hand and/or 2. The stimulus isn't enough to give the economy a shot in the arm after being laid comatose in lockdown.

Trump would like to see US 'reopen' by Easter Sunday on April 12, which seems optimistic.

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