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FTSE 100 closes firmly lower and below 5,000 despite Fed's latest move

Britain's blue-chip benchmark finished down over 196 points, or 3.79% at 4,993

Kingfisher plc -
FTSE 100 closed 3.8% lower on Monday as the coronavirus crisis continues to grip the global economy
  • FTSE 100 index closes 196 points lower
  • Hargreaves Lansdown top Footsie laggard
  • ITV hammered after it bins its divi

5.20pm: FTSE 100 closes below 5,000

FTSE 100 index closed 3.8% lower and below 5,000 on Monday as the equity-sell off continues amid the coronavirus outbreak and government attempts to curtail its spread.

Britain's blue-chip benchmark finished down over 196 points, or 3.79% at 4,993.

FTSE 250 also plunged, losing over 514 points at 13,078. On Wall Street, the Dow Jones Industrial Average plummeted 259 points at 18,914 despite the latest Fed intervention to buy government debt in a bid to prop up the economy.

"The Fed’s announcement about a quantitative easing programme that could run on for the foreseeable future jolted European equity benchmarks higher, but the optimism was short lived, and the markets moved south again. The absence of a fiscal stimulus package from the US government is playing a role in the sell-off too," noted David Madden, at CMC Markets.

"A medical report said the number of infections has increased to 350,000 worldwide, and the fear factor is setting in for traders, which is why they are dumping equities. As far as the west is concerned, the situation is getting worse by the day, in addition to that, there is a perception things will get even worse within the next few weeks," he added.

Financial stocks were among the biggest Footsie laggards, with investment groups Hargreaves Lansdown (LON:HL.) falling over 17% at 1,158p and St James Place (LON:STJ) shedding 13.105 to 521,40p.

3.45pm: Back below 5,000

The Footsie is back below 5,000 but making another half-hearted attempt at a rally.

The index was down 228 points (4.4%) at 4,963, which is more or less where it was before the Fed launched its latest attempt to calm financial markets.

Melrose Industries PLC (LON:MRS), the owner of the automotive engineer GKN, is leading the retreat, down 15% at 84.32p, accompanied by unit trusts supermarket Hargreaves Lansdown PLC (LON:HL.), which is also down 15%, at 1,189.5p.

Terrestrial broadcaster ITV PLC (LON:ITV) tumbled 8.4% to 59.28p after a grim trading update.

READ ITV cancels 2019 and 2020 dividends as advertising sales keep falling

3.10pm: It's deja vu all over again

The Fed gave it the “old college try” but its latest attempt to juice-up investor confidence appears to be failing.

US benchmarks are down by about 2.4% while in London the FTSE 100 is off 184 points (3.6%) at 5,007.

“The Fed continues to plunder an unlimited amount of value from your checking and savings accounts to stimulate the economy. It won’t work,” grumbles Murray Gunn, the head of Elliott Wave International.

I think “checking account” is American for current account.

Mickey Levy at Berenberg Capital Markets is less sceptical.

“These initiatives by the Fed are significantly more aggressive than its responses to the 2008-2009 financial crisis. The Fed has clearly learned from that period; its actions are aggressive and not tentative. We expect these actions will help financial markets to operate as efficiently as possible during the acute stage of this current crisis; however, we emphasise that the Fed’s initiatives do not and cannot contribute to fixing the health crisis and can only partially mitigate the negative economic fallout from the various mandated government shutdowns,” he said.

Luc Filip, the head of discretionary portfolio management at SYZ Private Banking, sounded relieved that “central banks and governments around the globe have deployed massive stimulus packages to provide ample liquidity and avoid a global recession”.

“Regardless of these measures, we think a ‘lockdown’ recession is unavoidable,” he said.

“We see three possible scenarios,” Filip continued.

“The optimistic scenario predicates measures will take quick effect, resulting in lockdowns being lifted sooner than expected. The base case assumes even if actions taken by governments and central banks start to have an effect, headlines will still largely be dominated by bad news as mortality rates, unemployment, and bankruptcies increase. Meanwhile, the pessimistic scenario predicts longer and deeper effects of the virus, hammering consumer confidence and resulting in close-to-zero capital expenditures, with young adults more severely impacted than initially thought.

“As of today, we do not believe the optimistic scenario is the most probable, given Western governments have taken longer to respond and imposed less stringent measures than Asian counterparts – such as China, South Korea, Hong Kong and Singapore; however, the pessimistic scenario is also not likely, given what we have learned from China and South Korea: the virus spread can be slowed down if strong measures are taken, coupled with discipline from the population. Consequently, we currently believe the base case scenario is the most probable,” he declared.

1.50pm: US stocks wilt despite Fed's latest commitment

Contrary to expectations, US indices opened on the back foot as the New York Stock Exchange abandoned open-outcry trading for the first time.

The Dow Jones index was down 370 points (1.9%) at 18,804 and the S&P was off 51 points (2.2%) at 2,254.

In London, the FTSE 100 was also wilting, down 172 points (3.2%) at 5,023.

1.10pm: US indices expected to open higher

US markets are set to open on the front foot after the latest effort by the Federal Reserve to pour oil on troubled waters.

The Dow Jones is expected to open 246 points higher at 19,420 and the S&P 500 32 points heavier at 2,337 after the Fed pledged unlimited quantitative easing.

In the UK, the FTSE 100’s rally has run out of steam a bit having enjoyed a boost following the Fed’s action.

The index was down 89 points (1.7%) at 5,102.

12.20pm: Fed finds "a bigger boat"

The US central bank, the Federal Reserve, has announced another blockbuster programme to support the US economy, pledging unlimited quantitative easing.

The Fed had previously set a US$700bn limit for asset purchases, aka quantitative easing (QE), but it is now pledging to buy an unlimited amount of Treasurys and mortgage-backed securities to provide financial markets with increased liquidity.

The Fed also announced many new lending programmes, earmarking US$300bn to support financial markets. As the famous line from the film "Jaws" has it: we're gonna need a bigger boat. 

The announcement caused the FTSE 100 to perk up, with the index recovering to 5,124, down 66 points (1.3%).

11.00am: Sideways shuffle at lower level

The Footsie is following a familiar pattern; a sharp movement in the first half-hour followed by a prolonged period of sideways shuffling.

London’s index of increasingly battered blue-chip stocks was down 198 points (3.8%) at 4,992, almost 70 points above its low point for the day.

“It is another brutal day for income-seekers as ten more UK firms announce dividend cuts and an eleventh – Britvic – joins Next and National Express in reviewing its pay-out as part of its contingency planning,” said Russ Mould, AJ Bell’s investment director.

“The loss of income from today alone totals some £500 million and takes the running aggregate this year to some £1.5 billion, a big blow for portfolio builders and savers who are looking for income at a time when interest rates on cash are reaching new historic lows,” he added.

Britvic PLC (LON:BVIC) shares were down 7.9% at 587p following the announcement.

DIY retailer Kingfisher plc (LON:KGF) brought a bit of cheer to the market, rising 8.1% to 136.4p, after it said nearly all of its vendors' factories in China have reopened, with capacity starting to rebuild.

9.40am: It's time to put the divi on hold and suspend the share repurchase scheme

“It's frightening how normal it feels to wake up on Monday morning and see markets flashing red and down another 5%.”

So said Craig Erlam of Oanda and he’s not wrong on the sentiment but is slightly off on the numbers; the FTSE 100 is down 4.6% or 238 points at 4,953.

As financial journalists get tired of writing the phrase, “has suspended its dividend and withdrawn guidance for the current fiscal year” the traditional defensive sectors – fags and groceries – are about the only ones that have blue-chips defying the trend.

In the former sector, Imperial Brands PLC (LON:IMB) is little changed while in the latter Wm Morrison Supermarkets PLC (LON:MRW) has somehow managed to eke out a 4.8% gain.

Oil giant Royal Dutch Shell (LON:RDSB) is down 3.6% as Brent crude for May delivery trades US$1.17 (4.3%) lower at US$25.81 a barrel.

The company announced a series of operational and financial initiatives that are expected to result in a reduction of underlying operating costs by US$3-4 billion per annum over the next 12 months compared to 2019 levels; a reduction of cash capital expenditure to US$20 billion or below for 2020 from a planned level of around US$25 billion; and material reductions in working capital.

It has also suspended its share buyback programme.

Academic publishing group Pearson PLC (LON:PSON) has been faring better than most stocks recently as investors foresee an increase in demand for its digital offerings but the stock crashed 11% to 446.5p this morning as it also suspended its shares repurchase programme.

The company said it is seeing uncertainty in those parts of its businesses that rely on learners and staff being able to access physical sites but a significant uplift in the use of its digital products and services and rapidly growing interest in its global online learning businesses.

8.50am: Another week of woe

As predicted, the FTSE 100 tanked at the open on Monday after US legislators failed to sign-off a US$2 trillion financial aid package that would have helped mitigate the huge economic blow on the world's biggest economy from the coronavirus pandemic.

The index of UK blue-chips tumbled 227 points to 4,963.07 in early deals.

WATCH: Morning Report: John Lewis, McDonalds to close all its stores and restaurants due to coronavirus

The tumble followed yet another rout in Asia earlier, with Australia, South Korea and Hong Kong bearing the brunt of the sell-off.

“Markets are again showing stress on fears that the economic damage will be worse than anticipated and that the response by governments and central banks will not be enough to prevent a mammoth recession,” said Neil Wilson, senior analyst at Markets.com.

Feeling the ripples from the other side of the Atlantic was US-focused building supplies giant Ferguson (LON:FERG), which tumbled 17% and led the FTSE 100 fallers.

It wasn’t alone. Pearson (LON:PSON), off 10%, Smiths Group (LON:SMIN), down 8%, and Rolls Royce (LON:RR.) were caught in the backwash too.

ITV (LON:ITV), meanwhile, lost 15% after it cancelled its dividend amid a continued fall in advertising revenue.

Meanwhile, Shell (LON:RDSA), off 2.3%, has killed its share buy-back as part of US$9bn of cost savings it is attempting to find.

Proactive news headlines:

Gfinity PLC (LON:GFIN) has been selected to host the F1 Esports Virtual Grand Prix, a series created to enable fans to watch Formula 1 races virtually. The esports firm said it will oversee the delivery of the tournament, tournament operations and broadcast production for the series, which will be played every weekend in place of the F1 Grand Prix, which has been postponed due to the coronavirus outbreak.

e-therapeutics PLC (LON:ETX) said it is gauging interest in its rapid screening technology as the pharma industry works to find an effective vaccine against coronavirus (COVID-19). Its “in silico”, or computer simulation platform has successfully found active compounds capable of protecting human cells in influenza. The firm, therefore, believes the same strategies could be used to identify combinations of compounds with “useful activity” against Sars-CoV-2, the virus which causes Covid-19.

Amryt Pharma PLC (LON:AMYT) chief, Dr Joe Wiley, said the business is well capitalised and resilient as he provided an update against the backdrop of the COVID-19 outbreak. Pro forma revenues of the newly enlarged group were up 13.1% at US$154.1mln in the year just gone as it reported that a strong end to 2019 carried on into 2020. As at December 31, the firm had US$65mln in cash. Amryt’s debt profile, meanwhile, offers “significant flexibility”, the firm said with no facility set to mature before September 2024.

Directa Plus PLC (LON:DCTA) has pointed out that its Italian operations are exempt from the restrictions recently imposed by the Italian government. The producer and supplier of graphene nanoplatelets-based products for use in consumer and industrial markets is classified as a chemical company in Italy and so is in a protected industry deemed to be providing essential goods and services.

NQ Minerals PLC (AQSE:NQMI) has engaged experienced Tasmanian mining specialist consultants to assist it to prepare a mine re-opening due diligence study to assess the opportunities available at the Beaconsfield gold mine. "In these challenging times, I'm pleased to advise that all of NQ's operations in Tasmania continue as normal,” said David Lenigas, NQ's chairman.

AFC Energy PLC (LON:AFC) has raised £1.4mln of new capital to boost financial liquidity so that the business is protected in the event of a prolonged coronavirus (Covid-19) pandemic. An existing institutional shareholder is the sole participant and it is subscribing for 14mln new shares, priced at 0.1p each. The price is marked at an 18.7% discount to Friday’s closing price in London. AFC last week unveiled several measures designed to help mitigate the impact of the coronavirus outbreak.

Bacanora Lithium PLC (LON:BCN) is continuing to make progress on all its workstreams, in spite of the coronavirus crisis. A particular focus remains on the completion of the project engineering work. The timetable for this engineering work has, however, been impacted by delays in Asia and North America due to the ongoing government restrictions. Whilst some weeks of engineering have been lost, completion of engineering and equipment selection is now scheduled for the third quarter of 2020. 

Metal Tiger PLC (LON: MTR) has participated in an A$4mln fundraising undertaken by Southern Gold (ASX:SAU). Southern Gold had planned to raise A$10mln, but revised the amount down due to the uncertain market conditions created by the coronavirus. Metal Tiger has participated in the revised fundraise through a subscription for 22mln shares at a total cost of A$2.2 million. Following completion of the revised fundraise, Metal Tiger will hold a 17.1% interest in Southern Gold.

Europa Metals Ltd (LON:EUZ) was fortunate to complete its first 2020 field season prior to the outbreak of the coronavirus, according to executive director Laurence Read. The European focused lead-zinc and silver developer is thus free to continue with metallurgical and flow sheet work as planned, with all employees apart from a skeleton staff now working from home.

Chesnara PLC (LON:CSN), the life assurance group, confirmed that it will report its results for the year ended 31 December 2019 on Tuesday 31 March 2020. It added, in light of government guidance regarding the Coronavirus pandemic, and in the interest of the health and safety of its staff and business partners, the presentation for analysts will now be held by telephone at 9.30am on 31 March 2020.

FastForward Innovations Ltd (LON:FFWD), the AIM-quoted company focusing on making investments in fast-growing and industry-leading businesses, provide an update after the market close on Friday in respect of investee company, Entertainment Direct Asia Ltd. (EDA), which trades as Yooya, in which the company holds a 12.5% interest which was valued at £1,586,000 in the Interim financial statements dated 30th September 2019. The company said it has been notified that an offer has been made to all shareholders in EDA for a share for share exchange with a newly formed Asia focused social commerce platform company. It added that, whilst it is the stated intention of the acquirer to raise funds at a significant premium to the acquisition price based on the improved value of the combined entities, the implied valuation of EDA in the share for share exchange would see a significant impairment to the value of the company's investment in EDA. The impact on the longer-term carrying value will depend on the final terms of any fundraising by the acquirer and the resulting success of the business, the group said. Fastforward chairman, Lorne Abony said: "It has become clear over the last few months that the original concept for Yooya could not be monetized to generate acceptable returns for shareholders. While it is disappointing that we expect to suffer a significant unrealised loss in the event the Acquisition concludes, I believe that Yooya may become a major constituent in a group uniquely positioned to create the trusted platform for consumers across China, and subsequently more widely across Asia."

SDX Energy PLC (LON:SDX), the MENA-focused oil and gas company, said that as a result of the announcement made by the Financial Conduct Authority on 21 March 2020 requesting that, as a result of COVID-19 uncertainties, all listed companies should observe a moratorium on the publication of preliminary financial statements for at least two weeks, it has been forced to delay today's planned publication of its preliminary financial statements and its audited financial and operating results for the year ended 31 December 2019. The company said it is in dialogue with AIM and other regulatory authorities on this matter and will endeavour to seek permission to release its preliminary financial statements and its audited financial and operating results for the year ended 31 December 2019 as soon as possible.

S&U PLC (LON:SUS), the specialist motor finance and property bridging lender, also announced that the publication of the company's Full Year Results for the period ended 31 January 2020 will be delayed beyond 24 March 2020, the date S&U previously stated it had expected to announce them. The group said the decision was made following a request by the Financial Conduct Authority (the FCA) to all public companies that, in the light of the ongoing COVID-19 developments, they delay making preliminary announcements that were due the week commencing 23 March 2020.

OptiBiotix Health PLC (LON:OPTI), a life sciences business developing compounds to tackle obesity, high cholesterol, diabetes and skincare, announced that it will be changing its accounting reference date and financial year-end from 30 November to 31 December to align financial reporting with similar companies on other international exchanges.  The change reflects the growing globalisation of OptiBiotix's products and will facilitate research analyst coverage with comparator microbiome-based companies on international exchanges like NASDAQ where end of calendar year financial reporting is more common.  Stephen O'Hara, CEO of OptiBiotix commented: "Despite the current general market volatility the board remain focused on creating a profitable and sustainable global business and building shareholder value. As we grow the presence of our ingredient … brands in global markets we need to facilitate research analyst coverage with comparator microbiome-based companies on international exchanges.  Moving our end of year forward one month supports this aim. As interest in the microbiome and OptBiotix's products grows improving international research coverage of OptiBiotix creates market interest and with it the opportunity to explore the possibility of a dual listing, particularly in those markets where there is potential for greater liquidity and valuation."

6.35am: Bloodbath predicted 

It looks set to be another bloodbath day for London’s traders with coronavirus worries continuing to haunt the markets.

America's failure to sign off a US$2 trillion support package for the world's largest economy sent Asia’s main bourses into freefall with South Korea (down 5%), Hong Kong (off 4%) and Australia (almost 7% lower) particularly hard hit.

The US aside, anxiety was rife that the government aid packages to combat the economic impact of the outbreak, including the unprecedented intervention by Chancellor Rishi Sunak on Friday, just will not be enough.

“While the fiscal responses are welcome there is a feeling that they could well amount to a starting point, and not an end point,” said CMC Markets analyst Michael Hewson.

“Cases of the virus are continuing to rise and governments are continuing to react by squeezing down on their populations freedom of movement, in the form of quarantines, lock downs, and closures of businesses like cinemas, pubs, restaurants and gyms.”

The week looks likely to be a slow one for scheduled corporate news with updates from B&Q owner Kingfisher (LON:KGF), pop maker AG Barr (LON:BAG) and mixers firm Fevertree (LON:FEVR) the pick of the bunch.

However, if last week is anything to go by, we are likely to be hit by a welter of unplanned COVID-19 warnings.

Significant events expected on Monday:

Finals: Pennant International Group PLC (LON:PEN), Quixant PLC (LON:QXT), Dunedin Enterprise Investment Trust PLC (LON:DNE), Medica Group PLC (LON:MGP)

Interims: Gfinity PLC (LON:GFIN), Orchard Funding Group PLC (LON:ORCH)

Around the markets:

  • Sterling: US$1.1705, up 0.65%
  • Gold US$ 1,497.60
  • Brent crude US$26.38

City headlines:

Financial Times

  • UK warns of tougher measures on public movement
  • Coronavirus latest: Shanghai downgrades health emergency response on falling cases
  • Asia stocks drop as US coronavirus stimulus hopes fade
  • Investors braced for big dividend cuts

Times

  • Company reporting ban triggers fears of stock market closure
  • Hedge funds stalk City for targets to short
  • Army of workers battling to keep Britain running
  • Number of companies in distress goes past half a million

Telegraph

  • Coronavirus risks worst slump since Second World War
  • Richard Branson to inject US$250mln into Virgin as coronavirus hits operations
  • WeWork bonds slump as virus hits co-working office firms

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