14th Apr 2020 08:14
(Alliance News) - The price of Brent oil was lower early Tuesday than where it started the long Easter weekend, despite a hotly anticipated production cutting agreement being reached.
OPEC producers and their allies agreed to reduce output by 9.7 million barrels a day, but some analysts fear this will be too little to match the fall in demand caused by the Covid-19 pandemic.
After a Sunday videoconference, top producing countries agreed to slash daily output by 9.7 million barrels from May, according to Mexican Energy Minister Rocio Nahle, slightly smaller than the cut of 10 million barrels a day envisioned earlier.
The agreement between the Organization of the Petroleum Exporting Countries and non-OPEC producers foresees deep output cuts in May and June followed by a gradual rise in production until April 2022.
However, "even these production cuts will not bring supply and demand into balance," commented Matt Weller, global head of market research at GAIN Capital.
"The mass disruption from the COVID-19 outbreak has absolutely decimated demand, and these cuts, especially relative to the inflation production figures over the last month, will not bring the market back into balance unless we see a dramatic 'V-shaped' economic recovery in the coming weeks."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 5,859.19
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Hang Seng: up 0.8% at 24,481.41
Nikkei 225: closed up 3.1% at 19,638.81
DJIA: closed down 328.60 points, 1.4%, at 23,390.77
S&P 500: closed down 1.0% at 2,761.63
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GBP: up at USD1.2544 (USD1.2455)
EUR: soft at USD1.0935 (USD1.0942)
Gold: up at USD1,712.04 per ounce (USD1,677.77)
Oil (Brent): down at USD32.15 a barrel (USD33.18)
(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
0830 EDT US IMF World Economic Outlook press briefing
0830 EDT US import & export price indexes
0900 EDT US G24 ministers and governors meet
1630 EDT US API weekly statistical bulletin
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The UK government has insisted its plan to tackle the coronavirus pandemic "is working" but warned the nationwide lockdown will not be lifted this week. Foreign Secretary Dominic Raab showed some cautious optimism as he revealed the latest data suggested the UK was "starting to win this struggle", three weeks after restrictions were imposed. But he insisted the virus was not yet past its peak and that it was "far too early" to talk about relaxing the measures, with reports suggesting the lockdown will be extended for at least another three weeks. The government has also faced criticism over whether more lives could have been saved if the lockdown had been implemented earlier, as the Department for Health said 11,329 people had died in hospitals in the UK as of 1700 BST on Sunday, with many more expected in care homes. It means the UK has more recorded deaths than any country except the US, Italy, Spain and France.
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Coronavirus deaths in the hard-hit US were flat for a second consecutive day, with New York's governor saying the "worst is over" as many countries weigh a gradual reopening of their shattered economies. Since emerging late last year, the coronavirus pandemic has killed around 120,000 and infected nearly two million, tipping the world towards a fierce economic recession as more than half of the globe hunkers down at home. As countries reach different stages of the coronavirus curve, debate is raging over whether to return to normal life and possibly risk a second wave of infections. While President Emmanuel Macron extended a tight lockdown in France by another month, Italy and Austria are reopening some shops and Spain is restarting construction and factory work. The US death toll has hit 23,200 – by far the worst-affected country – but Trump said: "It looks like we're plateauing, and maybe even in many cases coming down."
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Former White House candidate Bernie Sanders on Monday endorsed onetime rival Joe Biden for president, saying it was time to unite in the effort to defeat Donald Trump in November. The two veteran politicians, who each spent the past year battling for the Democratic nomination, appeared together by split-screen on Biden's livecast. The swift backing marked a notable change from 2016, when Sanders lost the presidential nomination race to Hillary Clinton but delayed endorsing her candidacy. That wait was seen as deeply damaging in that it exposed a divide within the Democratic Party.
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BROKER RATING CHANGES
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CREDIT SUISSE RAISES PENNON GROUP TO 'NEUTRAL' ('UNDERPERFORM') - TARGET 1035 (700) PENCE
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CITIGROUP CUTS SMITH & NEPHEW TO 'NEUTRAL' ('BUY') - TARGET 1700 PENCE
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BARCLAYS RAISES CENTRICA TO 'OVERWEIGHT' ('UNDERWEIGHT') - TARGET 50 (84) PENCE
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COMPANIES - FTSE 100
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Centrica confirmed it has appointed Interim Chief Executive Chris O'Shea as CEO on a permanent basis, effective immediately. O'Shea became interim CEO in March, having been chief financial officer since late 2018. The search for a new CFO is underway, the British Gas-owner added.
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Next said it will begin selling online again on Tuesday after putting extra safety measures in place to ensure warehouse staff can work safely. The fashion and homewares retailer closed its online operations in late March in the wake of the coronavirus crisis. But a statement posted on the Next website said warehouse managers have "successfully tested opening and taking a limited number of orders today" and invites customers to shop online again from Tuesday.
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COMPANIES - FTSE 250
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Ultra Electronics Holdings said trading in the first quarter of 2020 was broadly in line with expectations with a good underlying order book, revenue, profit and cash performance. Ultra said demand in defence markets and most of its critical detection and control markets remains robust. The defence conractor said it has developed a response plan with actions to mitigate any possible profitability, liquidity and cash flow challenges that may arise from Covid-19. However, the company has not seen any deterioration in trading so far. Still, Ultra said it is mindful of the uncertainty as to the duration of further disruption from Covid-19 and as a precautionary measure the board has decided to withdraw its previous proposal to pay a final 2019 dividend of 39.2 pence per share. Based on the board's current knowledge, Ultra said, it intends to pay an additional interim dividend of the same amount in the second half of 2020. The board will keep this under review as the pandemic unfolds, the company added.
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National Express said that, before the coronavirus outbreak, the first two months of 2020 delivered significant year-on-year revenue growth of 17%. However, since then the transport company has seen a decline in revenue as services have been withdrawn. National Express has temporarily suspended all National Express coach services in the face of the coronavirus pandemic. Nonetheless, the company said overall revenue for the period to March 31, was still up 8.9% year-on-year in constant currency and 9.4% on a reported basis. However, National Express said that in light of Covid-19, the board is withdrawing its recommendation for a final dividend.
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Hochschild Mining said that due to the ongoing uncertainty and the continued suspension of some of its operations, it has decided to withdraw its proposal to pay a final dividend for 2019. The gold miner said this was a prudent course of action reflecting its focus on the conservation of cash resources, and it will review the decision once the situation becomes clearer. Hochschild said it had USD166 million in cash on December 31, with USD33 million debt. Hochschild said both of its mines in Peru - Inmaculada and Pallancata - remain closed after that country extended its Covid-19 lockdown until April 26. In Argentina, the San Jose mine has been allowed to reopen but will need to ramp-up production over the coming weeks due to the effect of travel restrictions on workers.
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COMPANIES - INTERNATIONAL
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Westpac Banking said its first half earnings will be hurt by sharp one-off costs, including a USD900 million hit to cover anti-money-laundering proceedings. Other costs, including those from impairments and asset write-downs, mean Westpac will take a total post-tax earnings hit of USD1.43 billion in its first half, the bank said. Australia's financial intelligence agency AUSTRAC has accused Westpac of committing 23 million breaches of money laundering and counterterrorism rules in "serious and systemic" law-breaking involving more than USD7 billion. More recently, Australian firm Johnson Winter & Slattery slapped Westpac with a class action lawsuit. The action is related to share purchases made by investors in Westpac between December 2013 and November 2019.
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Anheuser-Busch InBev cut its final dividend in half amid the Covid-19 pandemic's "continued impact". The brewer shrank its proposed final 2019 dividend to just EUR0.50 per share from EUR1.00 per share, citing "the uncertainty, volatility and continued impact of the Covid-19 pandemic". "This decision is consistent with the company's financial discipline, deleveraging commitments and other actions taken to navigate this environment," said Anheuser-Busch.
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Tuesday's Shareholder Meetings
ValiRX (re removal of directors)
Big Sofa Technologies Group (cancelling admission of shares)
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By Tom Waite; [email protected]
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