- FTSE 100 closes up 71 points
- Bank of England cuts bank rate to 0.1%
- The central bank also ramps up its quantitative easing programme
5.15pm: FTSE finishes in the green
FTSE 100 index finished ahead on Thursday as buyers finally appeared to come back to the stock market.
It came after the Bank of England took more drastic action in the wake of the coronavirus pandemic, buying government bonds and slashing interest rates to 0.1% - just a week after cutting them to 0.25%.
The European Central Bank has also launched an emergency €750 billion package.
Britain's blue-chip benchmark closed up around 71 points at 5,151, while FTSE 250 shed over 178 points at 12,829.
Against the US dollar, the pound added 0.15% to US$1.1633 following the UK central bank move.
"The sellers have had it all their way for a few days now, but for once buyers of risk assets are stepping up to the plate," said Chris Beauchamp at IG.
"Equities are up, oil is recovering somewhat, and the Aussie dollar is advancing too. Has the global tide of central bank stimulus and the growing wave of fiscal stimulus (with a lot more expected) finally managed to draw a line in the sand?" the market analyst questioned.
On Wall Street, stocks also finally saw some green. The Dow Jones Industrial Average added over 214 points and the S&P 500 added 26 points.
4pm: FTSE up after BoE move
The Bank of England’s surprisingly robust action has helped push the Footsie back towards the heights it achieved in the first hour of trading.
The FTSE 100 was up 70 points (1.4%) at 5,150 threw the kitchen sink at the struggling economy.
“Britain is now a whisker away from the negative interest rate club. Rates have never been this low in the more than 300-year history of the Bank of England. Purchases of government and corporate bonds have been ramped up. A desperate measure for a desperate situation,” was what Tom Stevenson, the investment director for personal investment at Fidelity International called it.
????????The Bank of England has cut its Bank Rate by another 15bp down to 0.1% - the lowest level ever! pic.twitter.com/WlcRDeeuGZ— Danske Bank Research (@Danske_Research) March 19, 2020
In the view of ING Economics, the central bank has “effectively gone all-in to help limit the damage” from the coronavirus.
“So, the focus is now back on the Chancellor, where there are likely to be further industry and worker support packages announced over the coming days. In the current market, which doesn't bode well for currencies with large funding needs, the outlook for GBP remains tricky,” ING said.
“Negative rates aren’t considered a viable tool in the UK, which is why the Bank has followed up with additional quantitative easing. Again while this will come as little surprise, the scale is probably larger than most had been expecting,” ING speculated.
Helal Miah, an investment research analyst, was not alone in observing that the bank’s rate cut “will do nothing in slowing the spread of the disease which is more dependent of the Government’s measures”.
“It may also be little comfort for small businesses facing an Armageddon scenario and may do little to stop job losses racking up; however, the BoE’s actions that are coordinated with government strategies to prevent job losses will do much to prevent a dire economic situation after the virus disappears. In this regard, we need to see more action from the government to support the Bank of England’s effort, such as the discussions in the market along the lines of policies preventing firms from laying off employees.
“Although volatility has been extreme the movements of the last few days suggest to me that the market is trying to fix a bottom for the time being, this does not necessarily mean that we have reached a bottom. We are yet to face the horrible economic data that is to come in the next weeks and months,” he added.
3.20pm: FTSE 100 "back in black" after Bank of England cuts rates
Since 1.45pm the Footsie has been heading north and is back in positive territory after the Bank of England cut its interest rates.
London’s top-shares index was up 18 points (0.3%) at 5,098, having recovered from an intra-day low of 4,942.
Four days into his term as @bankofengland Governor Andrew Bailey has already made history, cutting the UK’s official interest rate to the lowest level since the Bank was founded in 1694.— Ed Conway (@EdConwaySky) March 19, 2020
Not that it’s the kind of history he would have wanted to make… pic.twitter.com/r7j91vjzxc
The UK’s central bank cut its key lending rate to 0.1% from 0.25%, setting a new lowest ever level in the bank’s history.
The bank also further increased its holdings of gilts and sterling non-financial investment-grade corporate bonds by £200bn to £645bn.
Counter-intuitively, sterling has perked up and is now up against the US dollar by 1.34 cents at US$1.1749.
The Monetary Policy Committee (MPC) also voted unanimously to enlarge the TFSME scheme announced on March 11.
“The Committee has gone big and early, again,” said Samuel Tombs, the chief UK economist of Pantheon Macroeconomics.
“The £200bn of asset purchases greatly exceeded economists’ expectations—we anticipated an extra £60bn, while the consensus expected no purchases this month—and tops the £70bn announced after the EU referendum,” Tombs noted.
“Back in January, former Governor Carney stated he saw scope for maximum gilt purchases of about £120bn, though the impending surge in gilt issuance has greatly increased the volume of bonds the Committee can buy without causing adverse distortions in the market. Mr Carney also stated that £120bn of gilt purchases would effectively deliver the same stimulus to the economy as cutting Bank Rate by about 100bp [one full percentage point]. In theory, then, the new tranche of QE [quantitative easing] effectively loosens monetary policy by an amount equivalent to a 167bp cut in Bank Rate. The MPC now has fired all of its arrows, though its QE programme might be extended once today’s £200bn of purchases have been completed,” he continued.
“Only £10bn worth of corporate bonds have been purchased to date. The MPC still intends to meet on March 25 and to publish the minutes of today’s meeting and that one on March 26,” he added.
1.45pm: Central banks' concerted action not enough to prevent soft US start
US benchmarks opened sharply lower despite concerted efforts by central banks worldwide to combat the effects of the coronavirus outbreak.
The Dow Jones 30-share industrial average was down 250 points at 19,248 while the S&P 500 was off 68 points at 2,330.
12.45pm: US indices to open lower
US markets are expected to open lower, adding to yesterday’s heavy losses.
Spread betting quotes indicate a starting level for the Dow Jones of around 19,554, down 345 points from last night’s close.
The S&P 500 is tipped to open 40 points lighter at 2,358.
First-time jobless claims last week in the US rose to 281,000, well above the 220,000 consensus forecast and up from 211,000 the previous week.
The US current account balance was US$109.9bn in deficit in the fourth quarter, representing an improvement on the previous quarter’s US$1,254.4bn deficit but slightly worse than economists’ had been expecting (US$108.6bn).
In the UK, the FTSE 100 was down 87 points (1.7%) at 4,993.
US Bank Regulators Set Rule Allowing Firms To Use New Fed Money Market Liquidity Facility Without Counting It Against Their Capital Requirements— LiveSquawk (@LiveSquawk) March 19, 2020
12.25pm: The effects of ECB's "big bazooka" wear off
London’s index of leading shares has dropped below 5,000 and looking at the prospect of an all too familiar triple-digit fall.
The FTSE 100 was down 92 points (1.8%) at 4,989.
“The effects of the coronavirus are now being felt in almost all sectors. Some will probably bounce back more easily than others,” noted ING Economics.
“Sectors differ in their ability to respond flexibly to supply disruptions and falls in demand,” it added.
“Business as usual can continue for professional services if their workforce logs on from home, but this is not an option in most other sectors. Where staff are employed on temporary or zero-hours contracts, sectors can reduce their staffing costs while demand is down, but in most cases, these costs are a small proportion of running costs.
“Once a global recovery gets underway, industrial production and wholesale trade might be able to catch up some of the lost ground. There will also be some catch up for retail trade as some purchases that were postponed are finally made but seasonal products will have missed their moment, and events, journeys and meals out may have been cancelled rather than postponed. Consumer confidence may take time to recover, and consumers may have drawn on savings during the period where they were unable to work. In the construction and health sectors, supply capacity will limit how much of the pent-up demand can be met,” ING said.
White House Mulls A 50 Year And 25 Year Bond To Finance The $1.3Tln Stimulus— LiveSquawk (@LiveSquawk) March 19, 2020
10.15am: Next proves a better clothes horse to back than Burberry
The Footsie is trading on or around last night’s levels as traders debate whether the central banks are doing enough to prevent a global recession.
London’s index of blue-chip shares was down 3 points (0.1%) at 5,074, despite sterling now being worth less than two Gazimbian mung beans.
Against the dollar, sterling is trading at US$1.1524, down nine-tenths of a cent. Weakness against the dollar is usually regarded as a good thing for most Footsie stocks but this morning it appears to be providing little more than an Elastoplast.
On the plus side, the European Central Bank (ECB) “has its mojo back” according to Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics after its “whopping €750bn” Pandemic Emergency Purchase Programme.
“This programme will run between now and the end of the year and include all assets currently eligible in the QE [quantitative easing] programme. By our calculation, this means that the ECB will be buying just over €115bn per month in the next nine months, which is a significant lift. The central bank also opened the door for continuing purchases beyond December,” Vistesen said.
“We have been very critical of the ECB in the past few weeks, primarily because we consider the message that monetary policy is close to its limits, with the inference that fiscal policy has to step in, as a very dangerous signal to send to markets, especially in this environment. We are happy to eat our words today, at least based on the scope and size of this package, and, just as importantly, the manner in which it is communicated to markets,” he said.
Bjarne Schieldrop, the chief commodities analyst at Nordic investment bank SEB, reckons peak fear in western and global financial markets is very close.
“The Saudi-Russia price war is now starting to fade a little into the background as the global demand shock gets centre stage. All oil analysts are now standing at the shore of the global oil market looking at the tsunami of oil surplus roaring against them in April 2020. It is going to crush oil prices to much lower levels unless OPEC+ turns around 180 degrees and initiates massive cuts to counter the evolving demand shock,” Schieldrop said.
So, we’ll all be able to fill the petrol tank up and then have no reason to drive anywhere.
Brent crude for May delivery is trading US$1.54 (6.2%) higher at US$26.40 a barrel this morning.
It has been a morning of contrasts for two fashion firms. Burberry Group PLC (LON:BRBY) was down 3.5% at 1,064.51p after it warned that retail sales have collapsed in the last few weeks due to the impact of coronavirus.
In contrast, Next PLC (LON:NXT) was up 11.7% at 4,302p after it declared it “could sustain the loss of more than £1bn”, representing 25% of annual sales, although it has raised the possibility of suspending share buybacks and dividends to ride out the crisis.
The falls came on the day that the Office for National Statistics (ONS) revealed that housing affordability improved in 2019 in England.
In England in 2019, full-time employees could typically expect to spend around 7.8 times their workplace-based annual earnings on purchasing a home, compared to 2019, when the ratio was 8.0.
At a local level, earnings grew faster than house prices in 55% of local authority districts, leading to improvements in housing affordability in these areas; however, these were not statistically significant changes, the ONS said.
Housing affordability improved significantly in England in 2019, but not in Wales.— Office for National Statistics (ONS) (@ONS) March 19, 2020
Full-time employees in England could spend 7.8 times their workplace-based annual earnings buying a home, while in Wales they expect to spend around 5.8 times earnings https://t.co/NDv6x1LXrx pic.twitter.com/a8QLYkfCnX
8.45am: Small gains
By recent standards, it has been a relatively sedate start to proceedings – perhaps no one is around to trade – with the FTSE 100 index on the rise.
London’s index of leading shares was up 25 points (0.5%) at 5,105 in early deals.
“European equities are broadly higher after the ECB fired its bazooka,” said Neil Wilson, senior analyst at markets.com, referring to the European Central Bank’s (ECB) “Pandemic Emergency Programme”.
“As cumbersome as it sounds, the €750 billion fund looks more like a bazooka than anything they've done thus far. Christine Lagarde and co knew they had to step it up and have. The asset purchase programme will loosen existing rules to cover non-financial commercial paper,” Wilson explained.
On foreign exchange markets, the pound remained in freefall against the US dollar. After yesterday’s heavy losses, it has lost slightly more than half a cent this morning to trade at around US$1.1560.
“This is largely about a dollar funding squeeze, which central banks are desperately trying to fix to little avail at present. If you look at the worst-performing currencies over the last few days they are the NOK, AUD, GBP and NZD, which funnily enough are the most risk-on currencies in the world,” Wilson said.
“Sterling has become a risk-on, risk-off play - RoRo in the trade. As HSBC analysts stressed yesterday in a note, Global Britain means a Global GBP, which makes it way more exposed to risk sentiment moves than it was in the past,” he added.
Back to the equity markets and Ocado Group PLC (LON:OCDO), which has been something of a “must buy” stock over the last week after traders sussed that the online grocer delivery business was receiving more business than it could handle.
The shares are down 4.9% at 1,407.5p this morning, however, after a trading statement in which the group said it had seen “no significant impact of Covid 19 in the quarter”.
Proactive news headlines:
BATM Advanced Communications Limited (LON:BVC) (TASE:BVC) is teaming up with an Israeli life sciences firm to develop and market a rapid home testing kit for COVID-19. Working with a company called Novamed, it is creating a kit that will analyse a sputum sample in minutes that identifies severe acute respiratory syndrome coronavirus 2, which causes coronavirus disease. BATM hopes to have a product with regulatory sign-off in the form of CE mark that’s ready to ship in three to four months.
Tavistock Investment PLC (LON:TAVI) has raised £650,000 in new funds and, in the process, the wealth manager has brought on board a new backer with significant financial services experience. Of the 32.5mln shares issued at 2p each, 30mln were bought by Hugh Simon, giving him a stake of just under 5%. Simon is the chief executive and owner of Hamon Investment Group, an asset manager based in Hong Kong and London.
Woodbois Ltd (LON:WBI) has inked a deal that will see the restart of the forestry and timber trading specialist's operations in Mozambique. US group Future Earth II will fund, manage and operate the AIM-listed group’s concessions in the country to produce sawn lumber and veneers. The 300,000 hectares of trees have been on care and maintenance for over two years after an export embargo was put in place.
LoopUp Group PLC (LON:LOOP) has highlighted a “material increase in volumes” for its virtual meeting products during March as the coronavirus outbreak drives demand for remote working technology. In a post-period update accompanying its full-year results, the AIM-listed company said it was “too early to predict how usage levels will develop in the short term” but added that it was receiving “amplified” approaches from companies struggling to adopt video conferencing solutions.
CentralNic Group PLC (LON:CNIC), the domain names and web services company, has applauded the turnaround at Team Internet, acquired late last year. During the period from 1 January 2019 through to 24 December 2019, which was the date of the sale of the German web services provider to CentralNic, Team Internet recorded revenue of US$74.0mln and adjusted underlying earnings (EBITDA) of US$12.3mln.
Frontier IP Group PLC (LON:FIPP) has become involved in ScienceIN2Business, a technology transfer competition run by the University of Lisbon. The competition invites academics to put forward projects with commercial potential, five of which are then chosen to be taken further. Frontier IP said it will provide mentoring support and expert advice to the projects entered into the competition and will also be involved in selecting the final shortlist.
Bloomsbury Publishing Plc (LON:BMY) has revealed that its performance for the year ended 29 February 2020 is in line with the expectations of its board although the Harry Potter books publisher pointed out that it is unclear how coronavirus will affect its numbers in the current year. In a pre-close trading update for the 12 months to 29 February 2020, the leading independent publisher said its financial position is strong with net cash of £31mln as at 29 February 2020, after paying £1.2mln for the acquisition of Oberon Books Ltd in December 2019.
Genel Energy PLC (LON:GENL) has sent a message of “resilience” and “strong performance” against industry and broader headwinds In its financial results statement. The group said its results for the twelve months ended 31 December confirmed production growth of 36,250 barrels of oil per day (bopd), up from 33,700 in 2018. Revenue rose to US$377.2mln, from US$355.1mln, while earnings excluding exploration (EBITDAX) amounted to US$321.8mln, up from US$304.1mln.
VR Education Holdings PLC (LON:VRE) says it will enter a strategic partnership with Taiwanese electronics firm HTC to distribute its ENGAGE platform globally. ENGAGE allows users to build and attend classes or meetings in a virtual reality (VR) environment. VRE said the platform will be distributed through all of HTC’s enterprise sales channels, although stressed that at this early stage there was no certainty that the partnership will be concluded.
discoverIE Group PLC (LON:DSCV), the customised electronics maker, said it is well prepared to quickly mitigate any disruption from the spread of the coronavirus. The group said that the current financial year, which runs to the end of March, had seen strong momentum throughout the year but it saw some isolated disruption to the business in the fourth quarter as a result of the outbreak of the virus.
88 Energy PLC (LON:88E) said drilling of the ‘production hole’ will start imminently in the Charlie-1 well on Alaska’s North Slope. The company, in a statement, revealed that operations encountered a minor weather related delay but surface casing has now been set and cemented in the well so that the next phase of well drilling can now begin. It noted that ‘logging while drilling’ results are expected once the well’s total depth has been reached and initial analysis has taken place – presently that it is anticipated in early April.
Anglo African Oil & Gas PLC (LON:AAOG) has announced that its associate Forum Energy has agreed in principle to provide £150,000 of interim finance for the company, before the end of this month, so that the company can satisfy its creditors. The company, which is the process of becoming a cash shell for future investment, in January agreed a funding deal with Forum which at that time saw the company receive £250,000. Alongside the latest injection of funds, Forum has appointed two directors to the AAOG board. Dexter Ferreira and Tania Maciver have both been appointed as non-executive directors. Meanwhile, James Cane has agreed to step down as AAOG's interim chief executive and finance director. Paul Forrest will act as part-time interim finance officer in a non-board role.
Bushveld Minerals Limited (LON:BMN), the AIM-listed, integrated primary vanadium producer which owns high-grade vanadium assets in South Africa, has announced the appointment of Dolly Mokgatle as an Independent non-executive director of the company. The group noted that Mokgatle is an established business leader in South Africa who has held various significant leadership positions within several of South Africa's state-owned enterprises, as well as within the private sector, including as a former managing director of the Transmission Group at Eskom. Prior to that role, she held various Eskom roles including, Executive Director of Corporate Affairs, Senior General Manager: Growth of Development and Acting Legal Manager. She is currently the chairperson of Total South Africa Pty Ltd, and a Non-Executive Director on the boards of Rothschild (South Africa) Pty Ltd, Bid Corporation Limited and Telkom SA SOC Limited. Ian Watson, Bushveld Mineral’s chairman, commented: "We are delighted to welcome Ms Mokgatle to the Board. Her extensive expertise in respect of South Africa's power network, coupled with her in-depth knowledge of energy policy, will be valuable as we continue to pursue our energy strategy.”
Ferro-Alloy Resources Limited (LON:FAR) announced that it has recently undertaken a marketing exercise with a limited number of potential investors to seek to place shares for Nick Bridgen, the company’s chief executive officer in order to make partial payment towards an existing around £3.3mln outstanding divorce settlement with his ex-wife. However, it added, given the unprecedented market volatility and lack of liquidity due to coronavirus (Covid-19) there has not been sufficient demand to successfully complete the planned placing.
As a result of the uncertainty as to the length of the disruption being caused by Covid-19, the group said, Bridgen has agreed to enter into a 12-month lock-in over the 64,738,800 ordinary shares he holds in the company. It noted that the CEO was subject to a 12-month orderly marketing arrangement entered into in conjunction with the company’s IPO, that was set to expire on 21 March 2020, and the lock-in arrangement replaces that orderly marketing arrangement.
accesso Technology Group PLC (LON:ACSO) said it has been notified that its chief executive officer, Steve Brown purchased 151,000 ordinary shares in the company at a price of 137.8p each on 18 March 2020. Following the transaction, the group added, Brown holds an interest of 665,774 ordinary shares, representing 2.4% of the total issued share capital of the company.
BB Healthcare Trust PLC (LON:BBH) said it has now been advised that, given concerns arising from the Covid-19 pandemic and the recent UK Government advice in relation to measures to manage the pandemic, the venue and facilities for the Annual General Meeting (AGM) are no longer available. The group said the AGM will still proceed on the notified date and time, 11am on 23 March 2020, but the board has determined that it will instead be held at Mermaid House, 2 Puddle Dock, London, EC4V 3DB and there will be no presentation from the Portfolio Managers and the sole business of the meeting will be to propose the resolutions as set out in the notice of AGM.
6.45am: Market tipped to fall
CFD and spread betting firm IG Markets sees the FTSE 100 index falling another 83 points, making the price 5,011 to 5,019 with just over an hour to go until Thursday’s open.
Wednesday saw pledges of liquidity, in the form of bond purchases, but at the same time, the market apparently meted out forced liquidations and a push from equity into cash.
The latest round of volatility was triggered in bond markets, sparked by the likely need for state-level borrowing in order to facilitate the societal supports announced in recent days.
“Fears about the effects of record bond issuance by governments in response to the coronavirus, has seen investors move out of long-term government bond markets in droves, sending long end bond yields sharply higher, with the US 10 year up over 50bps since the beginning of the week, while the 30-year has also seen a similar rise,” said Michael Hewson, an analyst at CMC Markets.
“In the last nine days, the yield on the 30-year has risen by over 1%. It was a similar story for UK gilts which have seen a 40bps rise since Monday, removing the benefits that came with this month’s emergency rate cuts from both central banks, while bunds also sank sharply, pushing yields up to -0.23%, from levels close to -0.6%.
“This spike in yields only serves to undo the work of lowering interest rates in the first place, and needs to prompt further action by central banks in order to regain control of the curve,” he added.
On Wall Street overnight, the Dow Jones gave up another 1,338 points or 6.3% to close at 19,898, whilst the S&P 500 lost 5.18% to end the session at 2,398. The Nasdaq Composite, meanwhile, finished down 4.7% at 6,989.
In Asia, Japan’s Nikkei 225 shed 1.04% to 16,552 and Hong Kong’s Hang Seng dropped 2.75% to trade at 21,677. The Shanghai Composite was 1.17% lower at 2,696.
Around the markets:
- The pound: US$1,1568, down 0.34%
- Gold: US$1,484 per ounce, up 0.5%
- Brent crude: US$26.35 per barrel, up 5.5%
- Bitcoin: US$5,407, up 3%
Significant events expected on Thursday:
Finals: Next PLC (LON:NXT), The Gym Group PLC (LON:GYM), Capital Drilling Ltd (LON:Ca APD), Hurricane Energy PLC (LON:HUR), Energean Oil & Gas PLC (LON:ENOG), Everyman Media Group PLC (LON:EMAN), Portmeirion Group PLC (LON:PMP), Safestyle UK PLC (LON:SFE), Sanne Group PLC (LON:SNN), Sportech plc (LON:SPO), TClarke PLC (LON:CTO), OneSavings Bank PLC (LON:OSB)
Economic data: US weekly jobless claims
- Coronavirus: 40 London Underground stations to be closed – BBC News
- Chancellor's plan under fire as pound crashes to 35-year low – The Telegraph
- ECB to launch €750bn bond-buying programme – Financial Times
- Thomas Cook collapse to cost taxpayers at least £156m – Sky News
- Covid-19 puts North Sea oil and gas in 'paper-thin' position – BBC News
- Council tax reform would help 'level up' north of England – The Guardian
- Zara shuts 3,785 stores worldwide as fashion chain suffers 'very significant' impact from coronavirus – Mail Online
- BrewDog begins making hand sanitiser amid shortages in UK – The Guardian
- Elon Musk: Tesla 'will make ventilators if there is a shortage' – Engadget
- The coronavirus is stretching Facebook to its limits - CNN