- FTSE 100 index closes 64 points lower
- US indices in red too
- US non-farm payrolls fell by 700,000 in March
5,10pm: FTSE 100 closes in red
FTSE 100 index ended the week lower, joining global indices in the decline, after a dismal monthly US jobs report.
Britain's blue-chip index fell over 64 points lower to close the day at 5,415. On the week as a whole, the benchmark fell around 1.7%. In the year to date, it has lost 29% of its value.
Meanwhile, the FTSE 250 lost over 337 at 14,099.
"Sentiment was already weak before the US non-farm payrolls report was announced, and even though the update was dreadful, the markets had a relatively muted reaction to the numbers," said analyst David Madden, at CMC Markets.
The US economy lost 701,000 jobs last month (March), while consensus had been for 100,000 job losses. The unemployment rate jumped from to 4.4% from 3.5%.
The Dow Jones plunged nearly 389 points, while the S&P 500 shed over 43 points. The Nasdaq index shed over 116 points.
One bright spot was the continued uplift in the oil price, with US crude gaining a further 4.9% to US$26.56. Brent crude added nearly 10% to stand at US$32.75 a barrel.
Supermarkets were among the notable few gainers in London as consumers continue to buy up their goods during the coronavirus lock-down. Sainsbury's (LON:SBRY) added 4.20% to 213.40p, while Morrison (LON:MRW) added 3.74% to 185.70p.
3.00pm: US jobs: "This is terrible but unfortunately it’s nothing compared to what’s coming in April,”
As expected, the Dow Jones index opened lower but the S&P 500 sprang a surprise, eking out a gain.
After half an hour of trading, the Dow Jones was down 12 points (0.1%) at 21,401 while the S&P 500 was up 6 points (0.3%) at 2,533 as traders ignored a March jobs report that everyone knows is an already out-of-date snapshot of the US jobs market.
BREAKING: US economy lost 701,000 jobs in March, ending 113-month streak of job gains that began in late 2010.— Heather Long (@byHeatherLong) April 3, 2020
Unemployment rate = 4.4% (highest since Aug. 2017)
**This data does NOT include most of the ~10 million layoffs from past two weeks**
True unemploy rate likely 10%
The US unemployment rate jumped to 4.4% from 3.5%, which was worse than the consensus forecast of 3.8%.
Average hourly earnings rose 0.4%, a shade above the consensus.
“This is terrible but unfortunately it’s nothing compared to what’s coming in April,” warned Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
“The drop in payrolls indicates that gross hiring stopped suddenly before layoffs began to rise because jobless claims in the survey week were only about 65K above the prior trend. Payrolls, however, capture the difference between the pace of hirings and firings; there are no reliable real-time data on the former. The net job losses are concentrated in leisure and hospitality, down 459K, with smaller declines in most other components, including retail, education, and healthcare, though the latter will rebound,” Shepherdson said.
“In the goods sector, the appearance of normal temperatures, after a run of mild months, hit the construction sector, and manufacturing shed jobs too. But these losses were trivial in the bigger picture. For April, we think payrolls will drop by 14-to-17mln, driving the unemployment rate to 12-to-14%. Note that the survey response rates were much lower than usual, so the payroll number could be revised substantially. Again, though, any March revisions will be nothing compared to the April collapse,” Shepherdson cautioned.
Today's US employment report broke the run of 113 consecutive monthly job gains, but the timing of collection meant it missed the carnage of the past two weeks, noted James Knightley, the chief international economist at ING.
“In terms of where we could get to, Treasury Secretary Mnuchin warned of a 20% unemployment rate, which President Trump later clarified as a worst-case scenario but with at least 10 million people having lost their job over the past couple of weeks and more job losses likely in the next few weeks as the COVID-19 containment measures spread and intensify – we could see a further 8-10 million job losses in the subsequent two weeks – we should be braced for a 10-11% reading for April unemployment rate with 15% conceivable for May. To put this in context the Global Financial Crisis saw unemployment peak at 10%, while the post-war high was 10.8% in 1982.
“We also have to remember the data won’t pick up undocumented workers who are paid in cash and cannot claim benefits. The Department for Homeland Security estimates that 3% of the population are undocumented migrants so around 11-12 million. If we then make an assumption that two-thirds of those are working in some way – the rest either being children or caring for children that would imply around 8 million workers – you would have to assume they are going to be incredibly vulnerable to losing their jobs,” Knightley said.
In London, the FTSE 100 index was down 35 points (0.6%) at 5,445, a decline but of a size that shell-shocked investors would probably accept.
1.30pm: US non-farm payrolls fall much more than expected; traders shrug their shoulders
The US economy shed 701,000 jobs in March. Economists had expected a decline of 100,000 jobs.
“The US NFP [non-farm payrolls] data wasn’t a shocking number as far as it is concerned with gold traders because we have not seen any massive surge in the gold price,” said Naeem Aslam of Avatrade.
“The initial reaction was to the upside, and overall, we are up for the day. Given the fact that this number has failed to produce any massive surge in the gold price, I think it is likely for the prices to grind higher only—the best cast scenario,” he added,
US indices, tipped to open lower before the release of the non-farm payrolls numbers are still expected to open in arrears, although slightly less so following the jobs number.
The Dow Jones industrial average is expected to open some 44 points lower at 21,370 and the S&P 500 a point softer at 2,526.
US jobs data weak and will only get worse: March NFP at -701k vs -100k expected, unemployment rate jumps to 4.4% from 3.5%. BUT data don't yet fully reflect millions of unemployment-insurance claims individuals filed in the last two weeks of March due to coronavirus pandemic. pic.twitter.com/gaKwHhZqwK— Holger Zschaepitz (@Schuldensuehner) April 3, 2020
In London, the FTSE 100 also perked up a bit, shifting from 5,419 to 5,428, down 52 points (0.9%).
U.S NONFARM PAYROLLS (MAR) ACTUAL: -701K VS 273K PREVIOUS; EST -100K— Neil Wilson (@marketsneil) April 3, 2020
1.00pm: Footsie rallies
The People’s Bank of China (PboC) is to cut the targeted reserve requirement ratio (RRR) by half a percentage point on 15 April.
China's central bank will cut by another half a point on 15 May.
The action will increase liquidity, with each cut of half a point expected to release around 400bn yuan, targeted at smaller banks.
The PBoC also announced that it would lower the interest rate paid for excess reserves from 0.72% to 0.35%.
“The cut suggests that damages from the coronavirus outbreak globally could linger at least until May. So the effectiveness of policy is highly important to gauge the speed of the economic recovery.
“Just how effective this targeted RRR cut will be, however, is questionable,” said Iris Pang, the chief economist for Greater China at ING Economics.
“The cuts are aimed at smaller banks to encourage them to lend to SMEs but banks have been reluctant to lend to SMEs that are facing difficulty in this pandemic. This could be especially true for exporters who are facing order withdrawals from the west. The Easter holiday is an important export season for China. With the lockdown and increased social distancing in Europe and the US, sales in western markets are expected to be dismal.
“Are banks willing to take high credit risk to lend to SMEs that are facing a cash flow problem? This may be unlikely,” Pang suggested.
In London, rather than going into lockdown ahead of the release of the non-farm payrolls numbers for March from the US, the FTSE 100 has recovered to 5,421, down 58 points (1.1%).
The US jobs number has been deemed irrelevant by some, given that the jobs market has been transformed over the last couple of weeks but for the record, the consensus estimate is for 100,000 jobs to have been lost.
11.45am: Weak rally proves short-lived
The Footsie has come off the bottom but the attempted rally already looks like it is on its last legs.
The index was down 62 points (1.1%) at 5,419.
“Stock markets are heading into the weekend in the red, but investors may be a little encouraged by how the week has gone despite notching up small losses along the way,” noted Craig Erlam at OANDA.
“The extraordinary moves that became an all-too-regular feature in March are occurring less frequently or severely. The falling knife scenario that we were seeing is looking less hazardous which may entice people back in, with stocks still trading at very discounted levels,” he said, before adding hastily (before the lawsuits come in) that, “this is not me calling a market bottom”.
The volatility may not be there to quite the extent it was a couple of weeks back but there are still close to a dozen FTSE 100 stocks showing losses of 5% or more, including hotels group Whitbread PLC (LON:WTB), asset managers M&G PLC (LON:MNG) and Ashmore PLC (LON:ASHM) and aircraft engines maker Rolls-Royce Holdings PLC (LON:RR.).
UK bus companies get £400m bailout. It is not accompanied by conditions - e.g. keep jobs, curb executive pay, dividends, end tax dodging (Stagecoach, Arriva used tax avoidance schemes); corporate governance reforms. Abuses and scandals will follow.https://t.co/qy9b1gBucM— Prem Sikka (@premnsikka) April 3, 2020
Investors got on board with the bus companies after the government announced a bail-out package to keep services running for essential staff to get to work.
10.30am: Services sector was “sucked into a black hole and flung into the unknown by the forceful impact of the COVID-19 coronavirus”
The Footsie is drifting further into the red as the market digests the latest Purchasing Managers’ Index data from IHS Markit/CIPS.
London’s index of leading shares was down 70 points (1.3%) at 5,410.
At 36.0 in March, down sharply from 53.0 in February, the IHS Markit/CIPS UK Composite Output Index dropped to its lowest level since this series began in January 1998. The latest reading was below the earlier 'flash' reading of 37.1 in March and pointed to a slightly faster reduction in private sector output than that seen at the height of the global financial crisis (index at 38.1 in November 2008), IHS Markit said.
The downturn in overall business activity was driven by a rapid fall in service sector activity, where the index was revised down to 34.5 from the flash estimate of 35.7, alongside the fastest decline in manufacturing production since July 2012.
“A record slump in UK service sector activity reported in March adds to the increasingly bleak economic statistics seen recently across the developed world. Emergency public health measures to combat the COVID-19 pandemic continue to mothball business operations, force aggressive cutbacks on non-essential expenses and trigger distress for household finances,” said Tim Moore, the economics director at IHS Markit.
"The severe impact on service sector activity in March was by no means limited to consumer-facing businesses or those directly hit by international travel restrictions. Technology services were the only area to signal a rise in business activity, but even this pocket of growth looks fragile as new workloads dropped more quickly in this category than at any time since 2011.
“There were numerous reports from survey respondents that placing staff on furlough had helped to mitigate more widespread job losses in March; however, employment levels across the service sector still dropped at the fastest pace for more than a decade, reflecting some forced redundancies and the non-replacement of departing staff amid widespread hiring freezes.
"With the UK economy now almost certain to experience a deep contraction in the second quarter of the year, perhaps the most important aspect of the Services PMI to watch for hopeful signs will be any recovery in the business expectations sub-index from the record low seen in March,” Moore said.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply, said the services sector was “sucked into a black hole and flung into the unknown by the forceful impact of the COVID-19 coronavirus”.
"The abrupt drop in new orders was the sharpest since the survey began in 1996 according to the PMI data. Export orders were hit particularly hard and, in some cases, dissolved into nothing as border closures and travel restrictions resulted in the immediate cessation of normal business activities.
"Predictably this had a severe knock-on effect on employment as job losses accelerated to levels last seen in June 2009. As the pandemic raged, some companies resorted to hasty redundancies and a freeze on job hires to stay afloat in the short-term,” Brock said.
9.45am: Services PMI revised even lower
The headline seasonally adjusted IHS Markit/CIPS Final UK Services Purchasing Managers’ Index (PMI) Business Activity reading for March was revised to 34.5 from 35.7.
The revised PMI reading was down sharply from 53.2 in February and is the lowest ever level. A reading below 50 indicates a decline in activity.
The survey’s compiler. IHS Markit, said it was the fastest decline in activity since the survey began in July 1996.
The slump in activity was almost exclusively linked by survey respondents to business shutdowns and cancelled orders in response to the coronavirus disease 2019 (COVID-19) pandemic.
Sharp reductions in activity were broad-based across the sector during March, with only the technology services subcategory recording pockets of continued business expansion.
UK Composite Output PMI ⬇️ to 36.0 in March, led by a slump in services activity as shops were closed to slow the COVID-19 outbreak. Latest PMI figures consistent with an over 1.5% qr/qr fall in GDP. More: https://t.co/73y7CXKyEZ pic.twitter.com/FQ51W3s5Ae— IHS Markit PMI™ (@IHSMarkitPMI) April 3, 2020
The FTSE 100 took the news in its stride; it had been loitering around 5,427 at the time of the release of the data and 15 minutes later it was still there, down 53 points.
8.30am: Cautious start
The FTSE 100 headed lower ahead of what is likely to be a session-defining set of US non-farm payroll figures.
The UK index of blue-chips lost 52 points to 5,427.65
In a sense the jobs data has been gazumped by Thursday's weekly jobless numbers, which showed a record-smashing 6.6mln lost work in the previous seven days, taking the two-week total to 10mln.
“We’re waiting for the data to confirm what we already know. The record one hundred-month plus stretch of jobs growth in the US has come to screeching halt,” said Jasper Lawler of London Capital Group.
“The non-farm payroll figure for March is expected to turn negative. Because the data was collected in the first half of the month, it's unlikely to capture the full damage from forced lockdowns and stay home advice. The really hideous stuff will probably show up in the April numbers.”
The markets in Asia were rattled by continuing coronavirus worries as the number of cases ticked past one million.
A number of big equity investors were cutting their exposure ahead of the weekend fearing what might unfold over the coming days, analysts said.
Here in the UK a bit of ‘bottom fishing’ pushed British Airways owner IAG (LON:IAG) to the top of the pile with a 2.7% gain.
After a rare up day for the oil price, the reality of the situation hit home once more for BP (LON:BP.) and Royal Dutch Shell (LON:RDSA), which are both collateral damage in the Saudi-Russia supply war. The shares were down 4% and 3% respectively.
Proactive news headlines:
Bango PLC (LON:BGO) has expanded its global data partnership and will receive a strategic investment from NHN Corp, a South Korean big data business. Under the agreement, NHN will invest £6.5mln into the Audiens data platform, owned by Bango’s subsidiary Bango Deep, giving NHN a 60% stake. The company said the two are aiming to develop Audiens into a global data leader through the use of a customer data platform (CDP), which will allow all brands to “plan, execute and analyze their online marketing activities”. In addition to the Bango Deep investment, NHN has also agreed to subscribe for around 3.5mln new shares in Bango itself, for £3.2mln.
ReNeuron Group PLC (LON:RENE) has said it is assessing the potential of an emerging cell technology to help in the fight against the coronavirus (COVID-19). It has developed a line of the human exosomes that can deliver a medically relevant payload; viral vaccines, for example. “Previously presented, unpublished data show that ReNeuron's exosomes can be loaded with biologically active cargo and delivered preferentially to certain specific sites in the body,” the company said in a statement. “This research is in its initial stages, the goal being to establish whether an increase in the potency of SARS-CoV-2 coronavirus vaccines in development can be enhanced in this way, utilising ReNeuron's established expertise in exosome isolation, modification and manufacture at scale.”
Coinsilium Group Limited (LON:COIN) has said its portfolio companies and partners are “well prepared to face the challenges and respond to the needs of a post-coronavirus world” as it updated on its progress amid the disruption of the pandemic. “The disruption caused by the measures taken to fight the coronavirus also show a move towards increased reliance on electronic forms of communication and payments by businesses and individuals. We see this global move as the generator of new opportunities for blockchain companies around the world”, the company said in a statement.
Bahamas Petroleum Company PLC (LON:BP.) said that its Bahamian backer, a substantial institutional family-office investor, has exercised its right to convert some £800,000 of loan notes into equity. This is the latest conversion, following £1.44mln in February, and the conversion price was marked at 1.28p per share. A total of 62.5mln shares will be issued to the investor, and, some £2.46mln of loan notes are presently retained by the investor.
Rockfire Resources PLC (LON:ROCK), the gold and base-metal explorer, has completed further technical interpretation on the company's wholly-owned Plateau Gold Deposit. Results from this work continue to demonstrate that a significant deposit of gold has been intersected at Plateau, which is part of the Lighthouse tenement in North Queensland, Australia.
Zoetic International PLC (LON:ZOE), the London listed vertically integrated CBD company, said it has issued 12,900,000 new ordinary shares in the company to members of its management team in accordance with incentive arrangements established in March 2019. The shares have been issued as fully paid in equal amounts to Trevor Taylor, the company's chief strategy officer, and Antonio Russo, the company's chief revenue officer.
Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) has completed civil earthworks at the process plant and non-process infrastructure site of the Lake Way Project in Western Australia's Goldfields region. Non-process infrastructure includes accommodation, power, raw water storage and buildings. Early process plant construction work is underway and the project remains on schedule for December 2020 commissioning.
Ferro-Alloy Resources Limited (LON:FAR) said it has allotted and issued 500,000 new fully paid ordinary shares in the company to a financial services provider in consideration for their retained services.
Learning Technologies Group PLC (LON:LTG), the provider of services and technologies for digital learning and talent management, has said it will publish its full-year results for the year ended December 31, 2019 on April 16, 2020. The revised date follows the group's compliance with the previous recommendations of the Financial Conduct Authority and the Financial Reporting Council that listed companies should delay the publication of preliminary financial statements for at least two weeks.
Separately, Learning Technologies also said that following the exceptional performance of BreezyHR, which was acquired in April 2019 and which delivered around 60% organic revenue growth in the full-year, it has now settled $4.0 million of the deferred contingent consideration by the issue of 2,408,585 new ordinary shares in lieu of a cash payment.
ADES International Holding PLC (LON:ADES), a leading oil & gas drilling and production services provider in the Middle East and North Africa (MENA), said it will announce its full-year results for the twelve months ended December 31, 2019, on Tuesday April 7, 2020. The release date has been set in accordance with the Financial Conduct Authority's directive for a two-week moratorium on the publication of preliminary statements of account, which ends on April 5, 2020.
Greencoat UK Wind PLC (LON:UKW) has said that, as it is no longer legally possible to hold its annual general meeting (AGM) in the way that the board had planned, the meeting will instead be convened at The Office, Home Farm House, Iwerne Minster, Dorset, DT11 8LT, with the minimum necessary quorum of two shareholders present in order to conduct the business of the meeting. As physical attendance at the AGM will not be lawful, shareholders who wish to register their votes on the resolutions should do so by completing and signing the proxy form that accompanied the 2020 AGM Notice. The AGM will be recorded and an audio cast of the meeting will be available for shareholders to listen to subsequently on the company website.
Location Sciences (LON:LSAI), the leading location data verification company, has reminded all shareholders that, to comply with the UK government's rules during the coronavirus pandemic, they should not be attending the company's Annual General Meeting (AGM) to be held at 9.00am on April 9, 2020 in person and instead appoint the group’s chairman as their proxy with their voting instructions. The company said, as an alternative, it is offering shareholders the option of attending the AGM via webinar by registering in advance by following the link: https://locationsciences.zoom.us/webinar/register/WN_FcxDE1aTR-C7f1RJVCtkBg .
Oracle Power PLC (LON:ORCP) said it is to introduce a new investor communication programme, which is aimed at giving shareholders regular news flow together with access to the board and management. This investor relations policy will include: updates from the CEO; shareholder conference calls; Q & A documents; and private investor events. The company said it will advise shareholders of the first scheduled event once there is visibility on the lifting of travel restrictions resulting from the coronavirus COVID-19 pandemic.
6.35 am: Back foot start predicted
London’s leading shares are set to open on the back foot ahead of the release today of US jobs figures for March.
Spread betting quotes indicate the FTSE 100 will open at around 5,433, down 47 points from last night’s close.
US markets managed to finish in credit yesterday despite a shocking weekly jobless number.
“Claims doubled last week from the previous week's record; we can't be sure they have now peaked,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics, who added that today’s March payroll number “is irrelevant” as “almost all the recent surge in jobless claims will hit April”.
The Dow Jones industrial average finished 470 points higher at 21,413 and the S&P 500 climbed 56 points at 2,527.
This morning, Asian markets have mostly been soft. Japan’s Nikkei 225 was 118 points lower at 17,701 and Hong Kong’s Hang Seng index was 139 points lower at 23,141.
“Overnight the Caixin survey of Chinese services was posted, and the reading was 43, while economists were expecting 39.6. The February reading was 26.5,” noted CMC’s David Madden.
The non-farm payrolls announcement in the US due out at 1.30pm may be “irrelevant” but traders will still trade on the back of whether it meets expectations or not.
“The consensus estimate is for 100,000 jobs to have been lost. The February report showed that 273,000 jobs were added. The unemployment rate is expected to tick up to 3.8% from 3.5%, while the average earnings rate is tipped to hold steady at 3%,” Madden noted.
On the corporate front in the UK, there will be the usual rush of coronavirus updates in which many companies will withdraw full-year guidance and suspend dividend payments.
One company that might have done well out of the market volatility is CMC Markets, which is due to release a trading update.
Significant announcements expected on Friday:
Economic data: US non-farm payrolls, US unemployment, US services PMI, UK services PMI
Around the markets:
- Sterling: US$1.2373, down 0.12 cents
- 10-year gilt: yielding 0.331%, up 1.72 basis points
- Gold: US$1,632.30 an ounce, down US$5.40
- Brent crude: US$28.60 a barrel, down US$1.34
- Bitcoin: US$6,798, down US$36
- Luckin Coffee lost nearly three-quarters of its value after an internal investigation uncovered “fabricated” sales worth hundreds of millions of dollars of sales last year.
- China Mobile has picked Chinese vendors Huawei and ZTE to construct its next-generation 5G mobile network.
- Oil jumped more than 20% after US President Donald Trump claimed Saudi Arabia and Russia were close to making huge production cuts and ending a painful price war.
- Standard Life Aberdeen will press ahead with a £300 million dividend payout, bringing relief to savers.
- The banking industry has hit back after being blamed for failing to issue emergency business loans quickly enough and abandoning those desperate for support.
- Britain's property market and economy could enjoy a 'strong rebound' once the coronavirus crisis ceases, Nationwide suggested.
- Soap-maker PZ Cussons has stripped its boss Alex Kanellis of retirement cash after the board found his behaviour had not been up to scratch while he was in charge.
- Morrisons will pay employees across the front line of its supermarkets a 6% bonus on their earnings over the next 12 months, managers said.
- Ocado's customer service ratings have collapsed in the past month as shoppers get frustrated with delayed deliveries and product substitutions, according to analysts.
- Easyjet's founder Sir Stelios Haji-Ioannou has demanded a vote on whether to sack a director in a row over a £4.5 billion aeroplane order.
- More than 6.65 million people filed for unemployment benefits in the US last week, with the data showing the devastating economic impact of the Covid-19 pandemic.
- The Guardian: More than 6.65 million people filed for unemployment benefits in the US last week, with the data showing the devastating economic impact of the Covid-19 pandemic.
- The financial regulator has announced plans to freeze loan and credit card payments for up to three months as part of emergency measures for consumers impacted by the coronavirus outbreak.
- The billionaire retailer Philip Green is asking for taxpayer help to prop up his crumbling fashion empire Arcadia.
- National Express will suspend coach services from midnight on Sunday after government measures to stop the spread of the coronavirus hit demand from travellers.
- Millions of small businesses and other bodies forced to shut their premises have been warned they could be left uninsured unless they take certain measures.
The Daily Telegraph
- The banking industry has hit back after being blamed for failing to issue emergency business loans quickly enough and abandoning those desperate for support.
- Investors face a dividend famine this spring as only 40 out of 450 listed UK companies in the FTSE 100, FTSE 250 and Aim 100 have committed to pay dividends, according to Peel Hunt, the broker.
- Serco, one of the government’s leading contractors providing public services, has postponed its six-year long wait to return to the dividend list.
- Centrica, the owner of British Gas, has cancelled its dividend after the Covid-19 pandemic caused an oil price collapse.
- The FTSE 250 recruitment company Hays became the first business to raise equity capital under the new rules.
- High street retailers suffered their worst fall in sales for at least 12 years in March, figures from BDO, the accountancy and business advisory firm, show.
- High street retailers have raised the price of cough syrup by 10.7% in the past week, figures from the Office for National Statistics show.
- Ovo Energy has put a third of its staff on furlough after cancelling non-essential meter reading and instalments.