24th Mar 2020 08:06
(Alliance News) - European markets opened sharply higher Tuesday, following big gains in Asia, as investors decided to "buy the fact" of lockdowns being imposed on country after country in the face of the Covid-19 pandemic, with the UK and South Africa being the latest two to make the drastic decision.
Investors also were increasingly impressed by the US Federal Reserve's move to flood the market with liquidity. Wall Street closed lower on Monday following the announcement but is pointed higher on Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 2.8% at 2,135.70
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Hang Seng: up 4.4% at 22,648.31
Nikkei 225: closed up 7.1% at 18,092.35
DJIA: closed down 582.05 points, 3.0%, at 18,591.93
S&P 500: closed down 2.9% at 2,237.40
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GBP: up at USD1.1637 (USD1.1471)
EUR: up at USD1.0825 (USD1.0741)
Gold: up at USD1,568.66 per ounce (USD1,543.08)
Oil (Brent): up at USD28.08 a barrel (USD25.30)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
G7 foreign ministers meeting via teleconference.
0930 GMT UK flash purchasing managers' index
1100 GMT UK CBI industrial trends survey
0930 CET Germany flash PMI
1000 CET EU flash PMI
0945 EDT US flash manufacturing PMI
0945 EDT US flash services PMI
1000 EDT US new residential sales
1630 EDT US API weekly statistical bulletin
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UK Prime Minister Boris Johnson is facing calls for clarity after placing the UK on a police-enforced lockdown with drastic new measures in the fight against the coronavirus outbreak. Johnson ordered people only to leave their homes under a list of "very limited purposes", banned public gatherings of more than two people and ordered the closure of non-essential shops. But police chiefs warned of phone lines being inundated with calls on Monday night with questions about what movements are still permitted, while members of Parliament also called for answers. In an address to the nation from Downing Street, Johnson ordered people to only leave their homes to shop for basic necessities "as infrequently as possible", and to only perform one form of exercise a day. They can also seek medical help, provide care to a vulnerable person or travel to work if "absolutely necessary", under the measures to last until at least Easter Monday.
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The US Federal Reserve launched an unprecedented effort on Monday to flood the US economy with money amid the chaos caused by the coronavirus pandemic, as Congress debated a rescue plan for American workers and companies. The Fed's New York branch, which handles the central bank's financial transactions, said it would start out by purchasing USD75 billion per day in Treasuries and USD50 billion per-day in mortgage-backed securities. The US economy is on life support, with some forecasters projecting a 14% contraction in the April-June quarter, while the global economy could shrink 1.5% this year. About a third of Americans have been ordered to stay at home, and the Fed warned of "severe disruptions" from the virus as it rolled out another series of measures to pump funds into the economy, including buying unlimited amounts of government debt – a move akin to printing money. But while that should provide oxygen to the financial system and keep businesses open, lawmakers continued haggling over an emergency aid package, with Democrats in the House unveiling a proposal that would cost USD2.5 trillion as they demanded more funds to help workers directly and more strings on any aid going to corporations.
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Japan entered an "aggressive downturn" in March, data from IHS Markit showed, with the already struggling economy further weakened by the Covid-19 pandemic. The flash Jibun Bank Japan composite purchasing managers' index reading for March was 35.8, a steep decline from February's final reading of 47.0 which had already been below the neutral 50.0 mark. The flash services business activity index print was 32.7 for March, down from a final reading of 46.8 in February. The March flash manufacturing PMI reading was 44.8, down from 47.8 in February.
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Japan said Prime Minister Shinzo Abe is scheduled to hold talks with the International Olympic Committee President Thomas Bach over the phone on Tuesday, with the coronavirus pandemic threatening this summer's games. The premier is expected to tell Bach that the Olympics should be rescheduled within one year if they are postponed, Kyodo news agency reported, citing an unnamed Japanese government official. The final decision, however, will be made by the IOC, the city of Tokyo and the Japanese Olympic Committee, the three parties who signed the host city contract when Tokyo landed the Games in 2013.
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BROKER RATING CHANGES
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HSBC RAISES TESCO TO 'BUY' ('HOLD') - TARGET 250 PENCE
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HSBC RAISES J SAINSBURY TO 'HOLD' ('REDUCE') - TARGET 200 PENCE
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JPMORGAN RAISES JOHNSON MATTHEY TO 'NEUTRAL' ('UNDERWEIGHT') TARGET 2300(2850) PENCE
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COMPANIES - FTSE 100
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Anglo American noted the lockdown curbs which are to be imposed by the South African government later this week in its bid to fight the spread of Covid-19. South African President Cyril Ramaphosa said a three-week lockdown will be imposed from midnight Thursday with new curbs on which businesses remain open also being introduced. Rampahosa had said all businesses will be closed, save for "pharmacies, laboratories, banks, essential financial and payment services, including the JSE, supermarkets, petrol stations and health care providers". Anglo American said on Tuesday: "Anglo American will review the detailed regulations relating to this action that are being published, including in relation to exemptions for certain business activities, and will issue a further statement in due course.
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Rio Tinto said it "will slow down" some of its operations due to the Covid-19 outbreak. At the Richards Bay Minerals site in South Africa, Rio will curtail production in compliance with the directive from the South African government, which has imposed a lockdown similar to the one in the UK, though only from Thursday. As a result, all mining operations at RBM will be halted by midnight on Thursday for 21 days, the miner noted. Rio noted an announcement by the government of Quebec, Canada for the closure of all non-essential businesses from midnight Tuesday to April 13. "We will work with the government to comply with its directive in relation to our Quebec operations. Any impacts to operations or production guidance will be reported to the market in due course." the company said.
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COMPANIES - FTSE 250
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Dunelm Group said it has closed its stores to customers in response to the UK government's declaration of a nationwide lockdown. The retailer said for the first ten weeks of the third quarter to March 7, total like-for-like sales were up 6.5%. Over the ten weeks, like-for-like store sales were up 2.4% and Dunelm.com was up 32%. Total sales growth, including the benefit of new store openings, was 7.9%. However, Dunelm said that over the past two weeks, it has seen a "progressively negative impact" on trading as a result of the pandemic, with total LFL sales down 8.8% - driven by reduced footfall in physical stores. Dunelm said it intends to temporarily close all of its customer facing operations from Tuesday, including Click & Collect. "At the same time, we have also taken actions to protect the cash resources of the business. This includes our decision to cancel the interim dividend, which was due to be paid in April. Our capital policy is unchanged and we remain committed to returning surplus cash to our shareholders. In light of the extraordinary circumstances, the board believes it is important to retain the cash in the business until further certainty is gained," Dunelm said.
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Sports Direct and Evans Cycles stores will stay open despite UK Prime Minister Boris Johnson imposing a nationwide lockdown to fight Covid-19, an email to workers at the Frasers Group units said late Monday. The email to employees said the stores were "uniquely well placed to help keep the UK fit and healthy". It said stores will remain open "where possible", though in accordance to the government's social distancing advice. The email also said: "The prime minister has openly recognised the importance of people staying active and exercising, provided they are doing so responsibly". Frasers Group has around 540 stores across the UK.
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Redrow cancelled its interim dividend of 10.05 pence as part of measures taken to manage the risks to stakeholders. The housebuilder said trading has remained resilient in the first 12 weeks of the second half to March 20, with the value of net reservations up GBP121 million at GBP525 million compared to last year. The order book stood at GBP1.4 billion. Redrow said it has a strong balance sheet together with GBP250 million of committed facilities and is "working proactively" to protect cash flow. Net debt currently stands at GBP116 million, and the company expects this to fall over the coming month as a high volume of homes legally complete.
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Greencore Group appointed Emma Hynes as its new chief financial officer to replace the outgoing Eoin Tonge. Hynes will assume the role on May 19 and was previously CFO of Press Up Entertainment Group.
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COMPANIES - OTHER MAIN MARKET AND AIM
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South32 withdrew its full-year earnings guidance and added it is clarifying whether it will be exempt from a South African government virus lockdown. The Perth-based miner explained that its work with electricity supplier Eskom classes it as an essential business. "South32 understands that businesses essential for the maintenance of power generation in South Africa are exempt from the lockdown. We will work with the government to determine the impact of this exemption on our South African Energy Coal and South Africa Aluminium operations, given the role they play in the sustainability of Eskom's generation network," the company said. South32 said it has made plans for its South Africa manganese and metalloys alloy smelter operations to "be placed on care and maintenance".
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Tuesday's Shareholder Meetings
Starvest
Quartix
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By Tom Waite; [email protected]
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