6th Apr 2020 08:11
(Alliance News) - Oil was joining other financial and commodities markets in a rally on Monday, amid optimism that the spread of the deadly new coronavirus is finally slowing.
Oil prices had fallen on Sunday after a meeting to discuss output cuts between OPEC and its allies was delayed, dimming hopes of swift action to support energy markets.
US benchmark West Texas Intermediate dropped 5.7%, while the North Sea benchmark Brent fell 4.1% to USD31.70 a barrel from USD33.05 late Friday. However, Brent had reversed all that loss and more by early Monday, quoted at USD33.85.
Oil prices remain down at levels not seen for years due to the coronavirus pandemic and a price war between Russia and Saudi Arabia, the kingpin of exporting group OPEC. Prices had bounced back from 18-year lows last week after US President Donald Trump said that Riyadh and Moscow would draw a line under their dispute and agree to major output cuts.
But analysts had been sceptical about a quick resolution, and doubts only grew when the meeting between OPEC and its allies, including Russia, was delayed.
They had been expected to meet via video conference to discuss oil production cuts on Monday but the meeting has been postponed to Thursday, the government of energy-rich Azerbaijan said at the weekend, AFP reported.
On Friday, Moscow had said it was prepared to discuss a reduction in the volume of about 10 million barrels a day.
But Stephen Innes, chief global markets strategist at AxiCorp, said that "traders remain extremely sceptical a deal will be forthcoming, and if one does occur, it will be woefully insufficient to stem the oil supply gushers."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 2.5% at 5,549.22
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Hang Seng: up 2.2% at 23,742.86
Nikkei 225: closed up 4.2% at 18,576.30
DJIA: closed down 360.91 points, 1.7%, at 21,052.53
S&P 500: closed down 1.5% at 21,052.53
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GBP: up at USD1.2266 (USD1.2221)
EUR: up at USD1.0821 (USD1.0791)
Gold: up at USD1,625.55 per ounce (USD1,618.25)
Oil (Brent): up at USD33.85 a barrel (USD33.05)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
China Tomb Sweeping Day holiday. Financial markets closed in Shanghai but open in Hong Kong.
0900 BST UK SMMT car registration figures
0930 BST UK construction purchasing managers' index
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Europe's hardest-hit nations saw some tentative signs of hope in the fight against the coronavirus Monday but the US braced for its "Pearl Harbor moment" as the country's death toll raced towards 10,000. The virus has infected virtually every corner of the planet, confining nearly half of humanity to their homes and turning life upside down for billions on a deadly march that has claimed nearly 70,000 victims. But there was cause for cheer in some European hotspots, with Italy reporting its lowest death toll in two weeks, Spanish fatalities dropping for the third straight day and France seeing its fewest dead in a week.
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UK Prime Minister Boris Johnson spent the night in hospital after he was admitted for tests as his coronavirus symptoms persist. He will stay for "as long as needed" in the London NHS hospital where he was taken as a "precautionary step" on the advice of his doctor – rather than as an emergency. The news came just an hour after the Queen delivered a message of hope to the nation amid the Covid-19 pandemic, saying "we will overcome it" although we "may have more still to endure". A total of 4,934 patients – including frontline healthcare workers – have died in hospital after testing positive for coronavirus in the UK according to the latest figures issued by the Department of Health, up by 621. Meanwhile, Health Secretary Matt Hancock warned outdoor exercise could be banned if people continued to flout the social distancing rules.
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Consumer confidence in the UK fell off a cliff in the last two weeks of March, tumbling at the fastest rate since records started more than 40 years ago, according to an index. People were asked about changes to their personal finances, the general economy and whether they feel now is the right time to make major purchases, during interviews between March 16 and 27. The results produced an overall negative score in the "consumer confidence barometer" from GfK of minus 34, indicating a sharp decline in confidence of 25 points from a score of minus nine in mid-March. The 25-point tumble was the biggest fall in confidence since records started in January 1974.
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Ireland's prime minister is to resume his former profession as a doctor to help healthcare workers struggling with high coronavirus patient numbers, local media reported. Leo Varadkar, who practised as a doctor for seven years before giving up the profession to become a politician, will now work one shift a week during the coronavirus crisis, according to state broadcaster RTE and other Irish media. "He wanted to help out even in a small way," Varadkar's spokesperson told RTE. Varadkar is set to carry out phone assessments with people thought to have been exposed to the novel coronavirus, according to the Irish Times newspaper. Irish officials have reported 4,604 cases of coronavirus as well as 137 Covid-19 deaths in the Republic of Ireland, according to Sunday figures from the Johns Hopkins University.
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Two senior Germany government ministers called on Monday for collective EU measures to be used in the fight against the new coronavirus. EU member states are at odds over how much fiscal firepower to use to cushion the economic blow of the pandemic, with finance ministers due to revisit the issue on Tuesday. In a guest article published in several European newspapers, Foreign Minister Heiko Maas and Finance Minister Olaf Scholz said joint EU initiatives - such as the European Stability Mechanism bailout fund and the European Investment Bank - could be used to mitigate the impact of the pandemic. But they did not mention so-called coronabonds, which the German government has so far rejected.
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BROKER RATING CHANGES
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RBC CUTS ANTOFAGASTA TO 'UNDERPERFORM' (SECTOR PERFORM) - TARGET 600 (760) PENCE
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RBC CUTS ANGLO AMERICAN TO 'SECTOR PERFORM' (OP) - TARGET 1500 (2300) PENCE
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GOLDMAN RAISES BHP GROUP TO 'BUY' ('NEUTRAL') - TARGET 1670 (1710) PENCE
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BERENBERG CUTS ST JAMES'S PLACE TO 'HOLD' ('BUY') - TARGET 830 (1153) PENCE
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COMPANIES - FTSE 100
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Rolls-Royce Holdings said that due to limited visibility of the duration coronavirus pandemic, it was withdrawing previously announced financial guidance for 2020. In February, the jet engine maker had retained its guidance for fixing Trent 1000 engines and had said that it remained on track to reduce aircraft on the ground for repairs to single digits by the end of the second quarter of 2020. Rolls-Royce said it exited 2019 in a robust liquidity and financial position. In response to the change in outlook resulting from the global spread of Covid-19 and to ensure cash headroom in the event of a prolonged reduction in trading activity, Rolls-Royce took the precautionary decision in March to draw fully on its GBP2.5 billion revolving credit facility, it said. Including this cash, which has been placed on short-term deposit, the company said its current gross cash balance is GBP5.2 billion. Rolls-Royce also secured an additional GBP1.5 billion revolving credit facility commitment with a consortium of banks, which will increase overall liquidity to GBP6.7 billion, it added. However, in light of the coronavirus outbreak, Rolls-Royce decided that it was no longer recommending a final shareholder payment of 7.1 pence per share with respect to 2019.
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Sage Group said that due to the ongoing health crisis it has decided to cancel its GBP250 million share buy-back programme. This had been suspended in March after GBP6 million of shares had been purchased. The accounting software provider said the downturn in global economic activity caused by the spread of Covid-19 is expected to hurt the business, as customers defer making purchase decisions, leading to a slowdown in new customer acquisitions and licence sales. Sage said it was "too early" to quantify with the damage the pandemic will cause to annual financial performance. However, the company now believes it is likely that organic recurring revenue growth will be below the previously guided range of 8% to 9%, and that the decline in revenue in some of its units will "accelerate significantly" in the second half. The company added that it has a strong balance sheet, with around GBP1.3 billion of cash and available liquidity as at March 31.
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Investors in HSBC Holdings in Hong Kong have threatened to pursue legal action against the bank following the cancellation of its dividend payout, the Financial Times reported. On Wednesday, the lender - which is listed in both London and Hong Kong - cancelled its dividend for the fourth quarter of 2019 and said no quarterly or interim dividend will be declared in the rest of 2020, and no share buybacks will be carried out. All the UK's major banks on Wednesday last week confirmed the suspension of shareholder returns following a request from the Prudential Regulatory Authority. However, retail investors in Hong Kong threatened to sue HSBC over the move, adding that they will attempt to requisition an extraordinary general meeting, the FT reported. At least 200 of the shareholders are being advised by Surich Asset Management.
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COMPANIES - FTSE 250
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Petrofac said it is suspending its 2019 final dividend and seeking to conserve cash and liquidity by reducing capital expenditure by 40%. Petrofac said it was reducing overhead and project support costs by at least USD100 million in 2020 and by up to USD200 million in 2021. The company said order intake of USD2.0 billion in the first quarter has increased its backlog to USD8.2 billion. Petrofac believes its cost-reduction measures, together with a capital-light business model and a strong competitive position in the Middle East, will protect it against near term pressures. However, Petrofac said it is "too early to ascertain and quantify" the effects of both COVID-19 and low oil prices on financial performance or new order intake. As a result, the company suspended previous revenue and margin guidance.
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COMPANIES - INTERNATIONAL
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The High Court is set to give its ruling on the first major battle in mass litigation brought against Volkswagen in England and Wales over the "dieselgate" emissions scandal. Almost 90,000 motorists who bought VW, Audi, Seat and Skoda diesel vehicles have taken legal action for compensation in a case which could be the largest consumer action in English legal history. Their lawyers say VW "cheated" European emissions standards – which were designed "to save lives" – by installing unlawful "defeat devices" in its diesel vehicles, meaning the vehicles were emitting up to 40 times the legal limit of nitrogen dioxide when out on the road. The English litigation was filed back in 2016, but reached what lawyers described as "a decisive court battle" at a preliminary hearing in December when the High Court was asked to decide whether software installed in VW cars was a "defeat device" under EU regulations.
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Saudi Arabian Oil said it has appointed former member of the US Social Security Advisory Board and former presidential advisory council member Mark Weinberger to its board. Weinberger - who was also global chair and chief executive of EY from 2013 through to 2019 - joins Aramco as an independent member of the board, replacing Andrew Gould.
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Monday's Shareholder Meetings
RM PLC
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By Tom Waite; [email protected]
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