Markets resume slide amid Covid-19 fears; Chinese factory profits slump - as it happened

Graeme Wearden (earlier) and Jasper Jolly

from Economics | The Guardian on 2020-03-27 17:41 (#51ANX)

Rolling coverage of the latest economic and financial news, as China's manufacturing sector and UK car makers are hit by the coronavirus

FTSE 100 down 5.25% but still strongest week since Brexit vote aftermath
Record slump in Chinese factory profits
Mike Ashley: sorry for Covid-19 mistakes
Coronavirus - latest updates
See all our coronavirus coverage

5.41pm GMT

The positive run on European stock markets had to end at some point. Sure enough, after three days of strong gains, major indices were in retreat on Friday as more companies gave warning about their exposure to the crisis.

Here are some of the important developments:

5.21pm GMT

Some more details of employees in the media business who are being furloughed.

The publisher of The Week, Dennis Publishing, will put 130 on leave.

New: Dennis Publishing, owner of more than 50 brands including The Week and Men's Fitness, is putting 130 staff on furlough until 1 June. Commercial and sales teams, central operations and the buyacar business to take the biggest hit.

5.16pm GMT

Tui, the travel and tourism giant, is to be kept afloat with a a1.8bn bridging loan from the German state bank.

We were economically successful before the crisis and will be again " However, we are temporarily a company with no product and no revenue. This situation must be bridged.

4.59pm GMT

No10 has released more information about the effort to make 30,000 medical ventilators, including that there are seven separate projects underway.

They include:

4.49pm GMT

The FTSE 100 lost 5.25% on Friday after what must be one of the most volatile weeks in recent memory - but that still made it the best week since July 2016, in the aftermath of the Brexit referendum.

For the entire week the FTSE 100 is up 5.93%, a 307.85 point gain

4.35pm GMT

The FTSE 100 has provisionally closed down by 5.45% at 5,498 points.

And it's worth checking in on the pound. Already on course for a strong week yesterday, it is now up against the US dollar by 1.8%, hitting highs of $1.2424. It started the day below $1.22!

4.30pm GMT

Fast fashion retailer Quiz has become the latest to close its website because of concerns over the health of workers in its warehouses.

The company will close its websites from later today, after shutting its shops on 22 March. Here's the snippet from its statement:

Having taken feedback from the Group's employees working at QUIZ's distribution centre, and in order to prioritise their safety and wellbeing, the Board has now taken the decision to temporarily close its online operations until further notice. QUIZ's websites will temporarily close from later today, with the distribution centre closing within the next 24 hours.

4.22pm GMT

Professor Chris Whitty, England's chief medical officer, is self-isolating for the next seven days after experiencing symptoms of coronavirus last night.

After experiencing symptoms compatible with COVID-19 last night, in line with the guidance, I will be self-isolating at home for the next seven days.

I will be continuing to advise the Government on the medical response to Coronavirus, supported by my deputies.

4.18pm GMT

The boss of the International Monetary Fund (IMF) has warned that it is critical to protect workers and keep companies out of bankruptcy in order to enable a quick economic recovery.

4.04pm GMT

The Carluccio's restaurant chain is reportedly preparing for administration, in a move that would endanger as many as 2,000 jobs.

Exclusive: Carluccio's, the restaurant chain founded by Antonio Carluccio, is lining up FRP Advisory to act as administrator; the appointment would threaten the future of one of Britain's best known casual dining brands and threaten 2000 jobs. Full story on @skynews soon.

3.49pm GMT

Virgin Atlantic, the airline founded by the billionaire Richard Branson, is going to ask the government for a big bailout, the Financial Times has reported.

Virgin Atlantic will in the coming days ask the UK for a package of commercial loans and guarantees worth hundreds of millions of pounds, as the carrier battles the aviation industry's worst crisis in decades, according to people familiar with the matter.

We are survivors. And it's got the advantage of other Virgin companies: if the worst comes to the worst we can help it out, occasionally.

3.17pm GMT

Markets on both sides of the Atlantic are steeped in red ink, with Wall Street down over 3% and Europe nursing 4% losses.

There's anxiety over the global recession, not helped by the slump in Chinese factory profits overnight.

First, COVID-19 incidence is accelerating in the US, rather than being contained. After more than 16000 new cases yesterday, the US has now the highest number of cases globally. The idea that the country can swiftly return to normal levels of economic activity appears unrealistic.

Secondly, the uncertainty about the extent and length of the shutdowns translates into large uncertainty about the eventual hit to growth and corporate profits

2.52pm GMT

Brewery chain Young & Co have announced they're putting almost all their 4,500 staff on temporary leave.

As 'furloughed workers', they should be entitled to 80% of their pay from the UK government. Just 29 'key workers' will carry on working from home while this crisis continues and the Group's pubs are closed.

2.43pm GMT

Oil pries are sinking -- a sign of pessimism over global growth.

Energy update:
Oil - US Crude 2270 -2.83%
Oil - Brent Crude 2755 -2.93%
Natural Gas 1684 -0.53%
Heating Oil 10612 +1.01%
Gasoline 5731 -3.23%
London Gas Oil 303 +1.03%#Oil #Brent #WTI #OOTT https://t.co/dxIEln9ooI

2.37pm GMT

Gatwick Airport is to close one of its two terminals next week and only operate flights in an eight-hour window every day with most passenger air travel now suspended.

London's second-biggest airport said the unprecedented move was necessary to protect staff and the business as revenues all but vanish (as John Menzies flagged up this morning).

1.54pm GMT

Make that a very Fretful Friday!

The New York stock exchange is handing back some of this week's stunning gains, as trading begins in New York.

1.27pm GMT

It's turning into a Fretful Friday.

Stocks are sliding further in Europe, driving the FTSE 100 down almost 5.75% or 334 points at 5482 points.

1.21pm GMT

The oil industry is also cutting roles, as energy firms try to isolate workers and combat Covid-19.

My colleague Jillian Ambrose explains:

North Sea's workforce has fallen by 40% within two weeks as oil companies cut the size of their offshore oil rig teams to help stem the spread of the coronavirus.

More than 4,000 rig contractors have lost their jobs in the wake of the UK lockdown, during a difficult year for the oil industry after the collapse of global oil prices.

1.09pm GMT

I mentioned earlier that John Menzies had cut its global headcount by 17,500...... but the good news is that it's a temporary move, and most of those employees haven't actually been laid off.

Instead, it's mostly staff being sent on different kinds of leave, the company tells us -- with only small portion of roles permanently cut.

12.54pm GMT

Metro Bank has become the latest lender to announce it's waiving interest charges on arranged overdrafts.
The temporary measure will be backdated to 1 March and be in place for four months until 30 June. It means any personal banking customers who's already been charged for dipping into their overdraft in recent weeks will be automatically reimbursed. Metro is also shutting its branches on weekends - which is a pretty big shift for a bank that prides itself on being open 7 days a week and 365 days a year.

We're closing our stores at weekends until further notice. From 30 March, we'll be open weekdays 10am - 4pm for customers who may need us at this time. Please check out our latest opening times before making your journey: https://t.co/to9hdv2lNX pic.twitter.com/AlqtPRhPWZ

"Making this change will enable us to free up more colleagues to support essential services in our contact centres.

"We apologise to customers for any inconvenience this may cause, however customers can continue to bank with us online, via our mobile app or over the phone."

12.01pm GMT

The pound dipped a little, after Boris Johnson confirmed he has tested positive for Covid-19.

It's only a small move -- sterling dropped from nearly $1.23 back to $1.22, as traders digested the news.

The pound erases its gains against the dollar after the announcement of Boris Johnson testing positive for coronavirus https://t.co/VQkt8CfMwh pic.twitter.com/idfqCPBklG

Get well soon. Sending you best wishes from Javid family and Bailey.

Get well soon @BorisJohnson

Europe wishes you a speedy recovery.

I believe we'll win this fight against #COVID19 together. #StrongerTogether https://t.co/h6YpRf40mY

11.45am GMT

The economics team at Nomura have slashed their forecast for the global economy this year, again.

They now expect world GDP to shrunk by 4% during 2020 -- with major economies including the UK contracting by over 10% in April-June (a really grim, and highly credible, forecast)

We have slashed our 2020 forecast of global GDP growth to -4.0% and now expect %q-o-q saar growth in Q2 of -42% in the US, -43% in the euro area and -44% in the UK - all similar to that in China in Q1.

In the good scenario, the virus is quickly beaten through strict compliance with social distancing, technological innovations and medical breakthroughs. The result is still a short, deep recession, but it is followed by a sustained recovery.

In the bad scenario, the virus beats us. The intravenous cash flow support policies do not last long enough to save companies and jobs. The result is a large, permanent loss in output featuring persistently high unemployment, company liquidations and financial crise.

11.38am GMT

Up to 300,000 house sales are at risk of collapsing after the government put the housing market on hold for three months, the online estate agent Getagent.co.uk has warned.

The firm's CEO, Colby Short, says around 290,000 transactions went ahead during each quarter of 2109. The fact that the market was so buoyant at the start of this year means even more sales are at risk right now.

"This may only be a temporary measure but for those who had already tackled the protracted process of selling only to see their sale or purchase sidelined on the home stretch, it will be a worrying few months. Our advice would be to keep calm, be patient and stick with it.

This is a development that impacts both buyer and seller so hopefully, those property sales that have already been agreed should still materialise once normality returns; bringing a huge boost to transactions in the third and fourth quarters of the year."

11.35am GMT

Engineering firm Rolls-Royce has been running its UK facilities until now but says it will cease "all but essential activity" for a week, starting at midnight tonight.

Staff will continue to be paid.

11.23am GMT

Just in: The prime minister has contracted the coronavirus.

11.16am GMT

Royal Bank of Scotland is turning the conference centre at its Gogarburn headquarters in Edinburgh into a foodbank distribution centre, to help people in difficulties during the current crisis.
The high street lender is asking businesses to bring in any perishable food and hygiene products they can spare to the Gogarburn site, where RBS staff will be running an "drive-in" donation system to ensure donors and volunteers can keep their distance. The bank's volunteers, which will also be kitted out with personal protective gear, will distribute the donations to charities including Trussell Trust food banks and Social Bite, a charity supporting vulnerable people in Scotland. RBS' catering contractors - Baxter Storey and Benugo - have also pledged to donate food from the bank's kitchens.

"This is a challenging time for everyone in Scotland and it is important that everyone looks out for one another. This is a time when we can work together to make a positive difference and we are calling on the public and companies who have the time or the resource and to get involved in our appeal."

10.37am GMT

Aviation services giant John Menzies says it has cut staffing levels in half, due to the coronavirus crisis.

Older readers (or indeed bloggers!) may associate the Menzies name with newspaper distribution. But these days, the firm is actually focused on airports -- handling cargo on the ground, managing luggage at several UK airports, and even operating plane fuelling services.

In the period since 10 March 2020, we have seen our international and domestic airline customers ground passenger flights on an unprecedented scale.

As part of our cost reduction initiatives, we have reduced global headcount by over 17,500 in response to the dramatic fall in volume. Reductions are being supported in some countries by governmental schemes and we hope that in the fullness of time a high number of these employees can return to the business.

We are engaged with the UK Government as we attempt to secure some of the emergency funding announced by the Chancellor of the Exchequer and await the refinement of the eligibility criteria for the COVID Corporate Financing Facility (CCFF) which we currently do not currently qualify for.

9.59am GMT

Outsourcing group Capita has just withdrawn its financial guidance for the year, due to the "unpredictable level of disruption caused by COVID-19".

While Capita's essential workers in the public sector are busy, the rest of its business has been hit by self-isolation rules. That includes work training programmes, back office functions, contact centres for retail and leisure clients, consulting and its corporate travel agency.

9.49am GMT

The slump in housing activity has forced online estate agent Rightmove to cancel its 2019 dividend, and to suspend all financial guidance for 2020. More here

9.32am GMT

European stock markets are all in the red today, after their best three day rally ever.

The Stoxx 600 index has dropped around 2.4%, having surged by 15% between Tuesday morning and Thursday evening.

Rallies don't last forever and clearly investors are happy to call time on this one as we head into another uncertain weekend.

The last three Monday's have all been relatively heavy down days, producing an average decline of 5.16% in the FTSE 100. We may have had a good run this week but the weekend can feel like a long time at moments like this and the numbers were getting from the US, which now has more cases than China or Italy, are getting uglier by the day.

9.28am GMT

Domino's Pizza has also suspended its dividend today, despite seeing a pick-up in demand from people ordering home deliveries.

In the last week, UK trading has accelerated, with the growth in delivery more than offsetting the lack of collection sales, it told the City.

The safety of our colleagues and customers is always our top priority, so we've strengthened our already high hygiene standards, rolled out contact free delivery and switched to delivery only to ensure we can confidently serve the public. We are also looking to recruit additional store colleagues and delivery drivers.

9.08am GMT

Getting back to the slump in Chinese factory profits....economist Shane Oliver of AMP Capital has spotted signs that China's economy may now be recovering:

Huge decline in Chinese profits reflecting shutdowns
(Goldman Sachs data) pic.twitter.com/PxM9u3S1yk

....but while #China profits collapsed into Jan/Feb...daily/weekly activity data continues to point to a recovery through March. Property sales and steel demand is back to around normal levels
(Goldman Sachs charts) pic.twitter.com/PF1Z2pN0UJ

8.56am GMT

Here's our news story on Mike Ashley's apology for mishandling the Covid-19 crisis, and his efforts to make amends....

8.48am GMT

Speaking of dividends... betting firm Flutter has suspended its 2020 payment to shareholders this morning.

The company, which owns Paddy Power and Betfair, blamed the cancellation of sports events around the globe.

8.42am GMT

Royal Mail has warned that it could be forced to reduce postal services, due to the impact of the coronavirus.

It told shareholders this morning:

In recent weeks, we have seen rising levels of sick absence as colleagues self-isolate or care for family members. W e cannot rule out reductions to services as COVID-19 develops.

8.29am GMT

Apology of the morning goes to Mike Ashley, for admitting that his Sports Direct chain (now called Frasers) made some serious blunders this week.

In a large helping of humble pie, Ashley has written an open letter, admitting that he should never have tried to keep Sports Direct shops open - or pestered ministers to be treated as an essential service.

In hindsight, our emails to the Government were ill-judged and poorly timed, when they clearly had much greater pressures than ours to deal with. On top of this, our communications to our employees and the public on this was poor.

Outside of Frasers Group, I have offered our support to the NHS and we are poised and ready for when that offer is accepted, with our entire fleet of lorries at their disposal - to help deliver medical equipment and supplies. This offer is not limited to the NHS but all key workforces across the Government. We will help wherever possible.

Finally, to reiterate, I am deeply apologetic about the misunderstandings of the last few days. We will learn from this and will try not to make the same mistakes in the future.

An open apology from our CEO Mike Ashley pic.twitter.com/q76uCq4btN

8.21am GMT

UK retailer Next is also among the top fallers in London, down 7.9%, after it halted online shopping last night.

NEXT has listened very carefully to its colleagues working in Warehousing and Distribution Operations to fulfil Online orders. It is clear that many increasingly feel they should be at home in the current climate.

Well, the shock news that Next has had to temporarily close down its Online business because of warehouse staffing problems is a big blow to the company and may cause a domino effect on other Online fashion operators, including ASOS and Boohoo"

8.14am GMT

Shares in UK housebuilders are among the top fallers, with Berkeley Group down 8% and Barratt Development losing 8.5%.

Last night, the government effectively put the UK housing market into deep freeze, telling buyers to delay their home moves if possible, and instructing sellers not to allow new viewings.

8.11am GMT

The slump in Chinese factory profits may have reminded investors that the world economy isn't in great shape.

For whatever reason, stocks have fallen sharply at the start of trading in Europe.

7.51am GMT

Britain's car industry is also being hit hard by the coronavirus, with output likely to tumble this year.

My colleague Jasper Jolly explains:

British car production will slump to its lowest level since the financial crisis this year, the industry has warned, after the coronavirus pandemic forced the closure of every large factory in the UK.

Passenger car output will fall by 18% to only 1.1m in 2020, down from 1.3m last year, according to forecasts for the Society of Motor Manufacturers and Traders (SMMT) carried out by AutoAnalysis. It would be the lowest number since the depths of the financial crisis in 2009, when 999,460 cars were made in the UK.

7.46am GMT

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

#China's industrial profits fell by a whopping 38.3% year-on-year in February, the biggest decline on record. This warrants some cautiousness as Europe and the US have yet to disclose the impact of the #coronavirus on #earnings. pic.twitter.com/wtTEy79YPl

The decline in profits points to lingering trouble for the manufacturing sector, which is wrestling with fallout from the health crisis that has severely hurt output. Most analysts now expect a contraction in gross domestic product in the first quarter.

Industrial production and sales fell sharply amid epidemic control efforts, while the costs of labor and depreciation continued to put pressure on companies, a statistics bureau official said in a statement published alongside the data.

China's industrial firms post steepest fall in profits in a decade https://t.co/WXLrMoEMnd pic.twitter.com/FVgOr358eJ

European Opening Calls:#FTSE 5716 -1.71%#DAX 9930 -0.71%#CAC 4501 -0.93%#AEX 478 -1.11%#MIB 17347 -0.13%#IBEX 6999 -0.48%#OMX 1465 -0.42%#STOXX 2821 -0.94%#IGOpeningCall

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