2nd Apr 2020 07:42
(Alliance News) - Stocks in London are set to edge lower on Thursday with markets remaining in risk-off mode as US President Donald Trump warned of "horrific" days ahead in the fight against Covid-19.
The UK itself experienced its biggest day-on-day rise in deaths so far, the government said late Wednesday. Some 2,352 patients had died in hospital after testing positive for the virus as of 5pm on Tuesday, the Department of Health said, up by 563 from 1,789 the day before.
In early corporate news, Centrica, Bunzl and Hays all scrapped planned payouts, with Hays also going cap in hand to investors, looking to raise GBP200 million. SEGRO, meanwhile, said it still plans to proceed with the payment of a final dividend.
IG says futures indicate the FTSE 100 index of large-caps to open 4.37 points lower at 5,450.20 on Thursday. The FTSE 100 index closed down 217.39 points, or 3.8%, at 5,454.57 on Wednesday.
In the US on Wednesday, Wall Street ended in the red, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closing 4.4% lower.
In Asia on Thursday, the Japanese Nikkei 225 index ended down 1.4%. In China, the Shanghai Composite is up 1.0%, while the Hang Seng index in Hong Kong is up 0.1%. Â
"With the global economy in freefall, markets have gone back to risk-off mode overnight as investors are struggling to look through President Trump's ominous forecast suggesting Americans could keep dying into June. Now the markets dispute to come up with some alphabet letters to analogize a potential economic recovery. Still, it's going to be anything but a "V" shape recovery. That's for sure," said Stephen Innes, chief market strategist at AxiCorp.
"Sentiment remains exceptionally fragile as investors are a flat-out bundle of nerves fretting over the potential impact the coronavirus will have in the US markets and the economy," he added.
More than 900,000 people have been infected by the novel coronavirus and nearly 46,000 have died since it first emerged in the Chinese city of Wuhan late last year, according to an AFP tally.
Tedros Adhanom Ghebreyesus, the head of the World Health Organization, said the number would hit one million "in the next few days".
Governments expanded lockdowns to affect about half of the planet, with funeral parties banned in the Democratic Republic of Congo, New York locking up its famed street basketball courts, and hard-hit Italy extending its economically crippling lockdown until April 13.
"We're going to have a couple of weeks, starting pretty much now, but especially a few days from now, that are going to be horrific. But even in the most challenging of times, Americans do not despair. We do not give in to fear," Trump told an evening news conference.
Cases in the US soared, rising to more than 213,000, the most anywhere in the world. The death toll in the US over the past 24 hours was a new one-day record of 884, and new known cases exceeded 25,000, according to a Johns Hopkins University database.
"As Covid-19 continues to spread worldwide, economies slump, stocks of personal protective equipment and key drugs dwindle in the US, and as Americans buy record numbers of guns, the market focus today is arguably going to be on one thing: How high is the spike in US initial jobless claims going to be this week?" said Rabobank.
"Last Thursday saw a staggering 3.3 million figure, far worse than what were already shocking consensus figures, and producing the kind of chart that many observers presumed must have been a mistake. It wasn't – and this time round the expectation is 3.7 million newly jobless," Rabobank added.
The economic calendar on Thursday has eurozone producer prices at 1000 BST and the US trade balance at 1330 BST, with initial jobless claims due at 1330 BST.
Sterling was quoted at USD1.2406 early Thursday, higher than USD1.2395 at the London equities close on Wednesday.
The euro traded at USD1.0947 early Thursday, firm versus USD1.0927 late Wednesday. Against the yen, the dollar was quoted at JPY107.30 versus JPY107.11.
Gold was quoted at USD1,586.97 an ounce early Thursday, soft against USD1,590.30 on Wednesday.
Brent oil was trading at USD26.65 a barrel early Thursday, up from USD25.38 late Wednesday, strengthening after President Trump said he will meet US energy executives this week to discuss plummeting oil values amid coronavirus and a Saudi-Russian price war.
In early UK company news, British Gas owner Centrica said it has cancelled its proposed final payout for 2019 and paused the divestment of Spirit Energy until markets "have settled".
In the customer-facing businesses, the firm said it is starting to see increased energy demand from residential customers as more people work from home, but a "more significant reduction" in demand from business customers as sites temporarily close.
"We also expect to see an increase in working capital outflows and customer bad debt, as certain customer segments defer payments due to the reduction of household incomes and business revenues," said Centrica.
A slump in oil prices is set to hit Exploration & Production's adjusted operating cash flow in 2020 by around GBP100 million. In response, Centrica has taken actions to reduce cash capital expenditure.
"The current environment also makes it more challenging to execute on the planned divestments of our interests in Spirit Energy and our interest in nuclear. We were due to receive initial bids for Spirit Energy around the end of March; however we have taken the decision to pause the process until financial and commodity markets have settled," the firm said.
As at the end of March, the company had GBP600 million of available cash and cash equivalents and GBP2.7 billion of credit facilities. There are no material covenants on any existing debt, Centrica added.
Meanwhile, SEGRO said it has decided it is appropriate to proceed with the payment of a 14.4p final dividend in May.
The property investor said it is "very well capitalised" with a strong balance sheet, high liquidity, and "significant" headroom to its financial covenants. SEGRO had cash and undrawn facilities of GBP1.2 billion at the end of March.
Rental income would have to fall by 80% or asset values by 64% before any debt covenants are breached, the firm highlighted.
Trading in the early part of 2020, prior to the Covid-19 crisis ramping up, was "encouraging". SEGRO said it is working, on a case by case basis, with customers representing around a quarter of total headline rent regarding relief, primarily by delaying rental payments.
For the most recent quarterly payment date, being March 25, 71% of rent due has been paid, and around 25% is subject to discussions over rescheduling payments. At the same stage last year, 96% of rent had been paid.
Distribution firm Bunzl said its "resilient" business delivered a good performance in the first quarter of 2020, but it has withdrawn guidance due to Covid-19.
Revenue was up 4.5% at actual exchange rates, and when adjusted for trading days and at constant rates, revenue was up 6%. Of this, acquisitions contributed 3% and underlying revenue growth 3%.
"Trading has been strong in safety across the quarter and has strengthened more recently in grocery, healthcare and cleaning & hygiene. The foodservice and retail sectors, which together account for around 35% of group revenue, have been increasingly negatively impacted by the COVID-19 crisis in the latter part of March," said Bunzl.
Given uncertainty around Covid-19, the firm withdrew its guidance for 2020.
Bunzl said it has a strong balance sheet and has paused all acquisition activity. It will no longer propose a final dividend for 2019 at its annual general meeting later in the month.
Recruitment firm Hays said Covid-19 has caused a "very material deceleration in client activity", and it is now seeking to raise GBP200 million.
Trading between the start of 2020 and mid-March was in line with forecasts, the firm said, with like-for-like net fees down 5% year-on-year.
"However, since then the rapidly escalating impact of Covid-19 has driven a very material deceleration in client and candidate activity. To date, across our major markets, the impact has been felt most in Europe, and least in Australia," said Hays.
While unable to estimate the extent of the impact on earnings this financial year, it is likely to be "substantial" and operating profit for the financial year ending June is expected to be "materially" below consensus of GBP190 million.
Hays has decided to cancel its 1.11p interim dividend, due to be paid next week, and will look to return to paying dividends at an appropriate time.
It has also decided to raise proceeds of around GBP200 million in a share placing and subscription.
"To ensure that we have a strong balance sheet and can continue with minimal or no debt once our end markets stabilise, the board has concluded that it is prudent to now raise equity. This will both provide the group with a further liquidity buffer and importantly best allow us to pursue organic growth opportunities with new and existing blue-chip clients," said Hays.
By Lucy Heming; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
HaysCentricaSegroBunzl