Stock markets tumble as Ryanair and RBS warn on coronavirus damage – as it happened

Jasper Jolly

from on 2020-05-01 14:12 (#52X5W)

Rolling live coverage of business, economics and financial markets

3.12pm BST

Even as world leaders gradually consider easing the lockdowns imposed on major economies, the economic consequences of the pandemic are barely started. The airline industry today illustrated that there could be much more pain ahead.

Irish budget airline Ryanair said it would cut 3,000 jobs, Aer Lingus is reportedly considering cutting 900 jobs, while Heathrow Airport warned that mass redundancies could also be on the cards.

3.05pm BST

The woes of the US manufacturing sector were laid bare by a PMI reading that was the worst since 2009, as employment prospects in the sector were decimated.

The April purchasing managers' index (PMI) reading was 41.5, down 7.6 points from the March reading of 49.1, according to the US Institute of Supply Management.

A 12.4-point drop in the U.S. PMI is an absolute outlier for a single month. Even during the global financial crisis, it dropped by a max of 5.9 points from September 2008 (44.8) to October 2008 (38.9). However, we've seen similar data across global markets over the last few weeks, so there is little shock value in today's numbers.

The markets have already moved beyond analysing the anticipated immediate collapse in economic activity to focusing on the duration of it. While there are some initial signs of stabilisation in indicators that have already dropped precipitously, the markets would like to see continued progress - moving from a stabilisation phase to a recovery phase.

April saw the manufacturing sector struck hard by the COVID-19 pandemic, with output falling to an extent surpassing that seen even at the height of the global financial crisis.

With orders collapsing at a rate not seen for over a decade, supply chains disrupted to a record degree and pessimism about the outlook hitting a new survey high, rising numbers of firms are culling payroll numbers.

2.45pm BST

One for the committed central bank watchers among our readers: Tiff Macklem is the new governor of the Bank of Canada (Mark Carney's alma mater).

Former Deputy Governor Macklem is the new Bank of Canada Governor $CAD pic.twitter.com/J8G51UHiRK

2.36pm BST

Wall Street has followed the lead of London and fallen, after disappointing corporate earnings and Donald Trump's threat to put tariffs on China in retaliation for its role in the crisis.

The US indices:

2.26pm BST

Aer Lingus, British Airways' stablemate, has reportedly told unions it is seeking staff cuts of around 20% due to the coronavirus pandemic.

Aer Lingus, part of International Airlines Group (IAG), which also owns British Airways, declined to comment, saying it was continuing to communicate directly with our employees and engage with their representative bodies."

Cuts of 20% would represent around 800-900 staff, with management promising to offer a voluntary redundancy programme, the source said.

1.50pm BST

The crisis has proved to be something of a reckoning for the oil industry, and ExxonMobil in particular.

The company is facing increasing investor pressure to act on the climate crisis, with the Church of England's investment fund targeting Exxon's board over their lack of movement to tackle the biggest issue of the time.

1.35pm BST

ExxonMobil, the US supermajor oil producer, took a $3bn charge in the first quarter as the coronavirus outbreak pushed it to a $610m loss - its first loss in decades.

$XOM | Exxon Mobil Q1 20 Earnings:
- Posts First Quarterly Loss Of $610M In At Least 32 Years
- Capex: $7.14B, +3.7% Y/Y
- Production: 4046M BPD (exp 3943M BPD)
- Reducing 2020 Capital & Operating Spend

1.19pm BST

It is a sign of the strange times that investors around the world are closely following the progress of drug development. The ups and downs of the testing process for remdesivir have caused billions of pounds of money to shift around the world as people hope for an effective antiviral treatment.

12.30pm BST

Sterling has slipped to a one-week low against the euro, with analysts blaming Brexit back-and-forth and a general aversion to riskier assets (as evidenced by the stock market selloff).

And remember, with many investors in Europe on holiday (even if confined to their homes) it is likely that trading is thinner than normal.

A source close to Britain's negotiating team said the country was confident it can get a deal on future ties with the European Union if Brussels started treating it as an independent negotiator.

But, underlining what sources in Brussels say is an impasse at talks since Britain left the EU in January, French officials later reiterated the 27-nation bloc's position that London must make concessions for a deal to be reached this year.

The main driver for sterling's weakness is the change in market sentiment to a more sombre mood, and this won't support currencies that are more closely linked to risk.

12.13pm BST

Heathrow airport has warned that it may soon follow British Airways in announcing mass redundancies unless the government restores confidence by planning for how flying could restart.

11.43am BST

An interesting side note to Royal Bank of Scotland's results this morning: as well as a big impairment for bad debts related to the crisis, it is closing its effort to create a digital-first lender to rival the likes of Monzo, Revolut and Starling.

That project, named (fairly inexplicably) as Bo, appears to have failed - although RBS said it was just deciding to roll the technology and the brand under its Mettle brand for lending to small businesses.

Also worth noting that RBS is winding down Bo, its short-lived and questionable attempt to take on digital rivals like Monzo that launched in November. Here's what they said just months ago: https://t.co/U2ku9XVIeJ

11.21am BST

The unions have had some time to swallow the bitter pill that is Ryanair's decision to cut as many as 3,000 jobs. Unite will argue that the decision should be reversed.

Referring also to British Airways' decision to cut 12,000 jobs, Unite national officer for aviation Oliver Richardson said:

This is another premature announcement, especially while the government's job retention scheme remains fully up and running.

Ryanair has significant cash reserves and is in a better place than many airlines to cope with the challenges that the Covid-19 pandemic has created.

11.11am BST

Most of Europe may be on holiday today, but for investors in the UK and US May day is not looking very relaxing.

The FTSE 100 has lost 2.1% so far, to 5,775 points. The FTSE 250 is down by 1.7%.

11.03am BST

An interesting story on the insurance industry this morning: the Financial Conduct Authority wants the courts to clarify whether businesses can claim money for business interruption caused by the coronavirus.

The Cit watchdog also told all insurers to assess whether they should be giving partial policy refunds during the pandemic.

We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy.

In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value.

This is a welcome step from the FCA and insurers will look to work closely with the regulator to make this process a success.

Although the vast majority of business interruption policies do not cover pandemics and the Government has confirmed it will not seek to retrospectively amend contracts, we support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered.

10.51am BST

Battening down the hatches is the metaphor of choice to describe the Bank of England's lending data, as the coronavirus storm hit.

The data don't contain any of the government's emergency loan schemes, so expect much more in April.

April data will be more illuminating, as they will reflect the impact of the furlough scheme and rising unemployment on households' incomes and cash holdings. But with all households seemingly running a very tight ship at present, excess savings should accumulate this year, potentially laying the ground for a strong rebound in spending in 2021, when the virus should no longer be a threat.

10.46am BST

Back on those extraordinary Bank of England data, households paid back 2.4bn of credit card debt - suggesting a huge fall in consumption that almost certainly augurs a recession.

There was 5.4bn less lending to households than February - and that was with only a week of full lockdown. April's data will certainly be interesting...

The rise in UK Money Supply was the LARGEST seen for households and businesses since records began in 1963. https://t.co/GswKsm15kf

10.25am BST

It is a torrid time for Trafford Centre owner Intu, facing the prospect of companies unable or refusing to pay rent in its shopping centres.

Indebted shopping centre owner Intu has appointed a Chief Restructuring Officer, to help as it "works through its strategy to fix the balance sheet".Intu has received 40% of rent due on 25 March, criticises "a very small number of cases where customers are not currently engaging"

Intu says it's offering monthly rental payments to its retail tenants, but is scathing about large, well-capitalised brands who have the ability to pay but have chosen not to".

As it grapples with a collapse in rental income, the owner of the Trafford Centre in Manchester and Lakeside in Essex has agreed waivers with some of its lenders, particularly the seven banks which provide its overdraft facility, to prevent potential breaches. It had warned in late March that it would breach the terms on its debt commitments following a collapse in rent.

10.08am BST

The final reading of IHS Markit's manufacturing purchasing managers' index (PMI) confirms what we already knew: it is a dire situation for British factories.

The UK's manufacturing PMI reading came in at 32.6 in April, slightly worse than the flash reading of 32.9. That's confirmed as a record low.

UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey's 28-year history.

Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19. The only pockets of growth were seen at firms making medical and food products.

9.56am BST

UK consumers' credit card debt fell in annual terms for the first time since the Bank of England started tracking the data in 1987 in March, as lockdown froze spending but job guarantees kept millions in work.

The annual growth rate of credit card lending fell to -0.3%, the first negative annual growth since the series began.

9.43am BST

The amount of credit offered to UK consumers grew at the slowest pace since 2013 in March, while the number of mortgage approvals fell to its lowest in the same period, according to the Bank of England.

Mortgage approvals for house purchase fell to 56,200, their lowest level since March 2013.

9.29am BST

Some interesting moves on currency markets after Donald Trump last night suggested that he might try to hit China with more tariffs in retaliation for its role in the crisis.

The US president said last night that a trade deal with China was now of secondary importance to the coronavirus pandemic. He also threatened new tariffs on Beijing and said he had seen evidence for the unproven theory that Sars-CoV-2 originated in a Wuhan infectious disease lab.

OFFSHORE-TRADED CHINESE YUAN FALLS 0.7% TO ONE-MONTH LOW VS DOLLAR AFTER US PRESIDENT TRUMP THREATENS TARIFFS AGAINST CHINA pic.twitter.com/EOqeOONcQ8

9.15am BST

The British and Irish aviation industry appears to be running what basketball fans might term a full court press when it comes to requesting state aid: Heathrow Airport's boss is also asking for help.

John Holland-Kaye, according to Reuters, has said the government maybe doesn't understand how important aviation is for the rest of the economy. Virgin Atlantic (a major presence at Heathrow) may go bust without help, he said.

9.02am BST

In the barrage of corporate news earlier, we didn't cover Nationwide's house price index, which showed that the housing market was actually heating up before the crisis.

Annual house price growth increased to 3.7% in April, up from 3% in March-the fastest pace since February 2017 (when annual growth was 4.5%).

It's important to note that the impact of the pandemic is not fully captured in this month's figures. This is becauseour index is constructed using mortgage approval data, and there is a lag between mortgage applications being submitted and approved.

Indeed, circa 80% of cases in the April sample relate to mortgage applications that commenced prior to the lock-down, and hence before the full extent of the impact of the pandemic became clear.

8.45am BST

Refunds for customers with cancelled flights will be issued in a month or two", O'Leary added.

8.42am BST

Ryanair's regional bases (outside major hubs such as Stansted, Gatwick, Manchester and Birmingham) could shut, O'Leary said.

There will be final announcement by 1 July, he said:

Some of the other regional bases will be very marginal this winter.

8.39am BST

Ryanair's O'Leary has also hammered home his point about state aid, saying that his airline and others that don't have government support face a torrid couple of years".

He said:

When we have to come back we'll have to compete with airlines that have limitless state aid funds to enable them to engage in below-cost selling.

It's going to be a torrid couple of years for airlines like Ryanair, BA, and others who don't get state aid.

It's going to be a great couple of years for passengers: you will see lower air fares, you will see, certainly this summer, lower hotel prices in place like Spain, Portugal and Italy as they try to recover something of their tourism season.

8.34am BST

Ryanair chief executive Michael O'Leary has raised the prospect of further job cuts down the line if the a coronavirus vaccine is not found quickly.

If a vaccine is found, then clearly the recovery will be stronger. If a vaccine isn't found then clearly we may have to announce more cuts and deeper cuts into the future.

While we expect to be back flying some services in July and August we think that the build-up will be slow. Passengers will be wearing face masks, there will be temperature checks at airports.

8.15am BST

Ryanair's job cuts will start in July, subject to consultations with unions.

The airline said:

As a direct result of the unprecedented Covid-19 crisis, the grounding of all flights from mid-March until at least July, and the distorted state aid landscape in Europe, Ryanair now expects the recovery of passenger demand and pricing (to 2019 levels) will take at least two years, until summer 2022 at the earliest.

8.14am BST

While British Airways has just moved to lay off 12,000 staff, telling them that there was no government help available, its sister airlines in parent company IAG in Spain have just been granted 1bn in state-backed loans.

Iberia has signed a financing agreement for 750m and Vueling for 260m for bank loans guaranteed by the Spanish Instituto de Credito Oficial, under a Covid-19 scheme set up by Spain to help business.

8.11am BST

The FTSE 100 has lost 2.1% in the opening minutes of trading.

RBS is actually one of only four risers this morning - thanks largely to its continued profitability.

7.56am BST

Royal Bank of Scotland suffered a near-50% drop in first quarter profits after putting aside 802m to help cover a potential surge in bad debts due to the Covid-19 outbreak, making it the latest UK bank to reveal the mounting cost of the pandemic.

[The group] has significant exposures to many of the commercial sectors that are already being impacted by the Covid-19 pandemic, including property, retail, leisure, travel and shipping.

7.46am BST

Ryanair is planning to cut 3,000 jobs and reduce staff pay by up to a fifth in response to the Covid-19 crisis, which has grounded flights.

7.39am BST

Good morning, and welcome to our live coverage of business, economics and financial markets.

It's May Day, and those stock markets that are not on holiday have started the month with a nasty fall, taking their lead from disappointments last night on Wall Street.

European Opening Calls:#FTSE 5809 -1.56%#DAX 10664 -4.00%#CAC 4481 -4.07%#AEX 501 -4.85%#MIB 17277 -2.34%#IBEX 6791 -3.75%#OMX 1537 -3.98%#STOXX 2871 -1.95%#IGOpeningCall

Note - other than FTSE, all underlyings closed for Labour Day. Our prices online nonetheless.

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