25th Mar 2020 07:43
(Alliance News) - Stock prices in London on Wednesday are set to build on the previous session's rally after the US Senate agreed to a USD2 trillion stimulus package to boost the virus-stricken American economy.
In early UK company news, travel food kiosk operator SSP reported a substantial thump to trading due to Covid-19 and planned an equity raise, while Persimmon cancelled its interim dividend and deferred payment of its final dividend as it awaits clarity over the health crisis.
IG says futures indicate the FTSE 100 will open 51.19 points higher at 5,497.20 on Wednesday. London's blue-chip index closed up 452.12 points, or 9.1%, at 5,446.01 on Tuesday.
In the US on Tuesday, Wall Street surged with the Dow Jones Industrial Average ending up 11%, the S&P 500 up 9.4% and Nasdaq Composite up 8.1%.
"What a difference a day makes with the Dow posting its best one-day gain since the days of the Great Depression in 1933, and the S&P 500 its best day since 2008, as melt down Monday, turned into turnaround Tuesday," commented Michael Hewson at CMC Markets.
"Reports that US politicians have finally agreed on a deal has helped engineer a fresh lift to investors and as such markets here in Europe look set to open slightly higher, as a result as we look to US politicians voting the deal through later today," Hewson said. "Even if they do deliver, it will still require evidence of a plateauing in global virus cases for these gains to really stick, and that doesn't look likely, especially since India became the latest country to go on a total lockdown."
The Senate and White House have reached a deal on a USD2 trillion stimulus package for the US economy and millions of Americans ravaged by the coronavirus crisis, the top Republican lawmaker said early Wednesday.
"At last, we have a deal," Senate Majority Leader Mitch McConnell said, citing a massive "wartime level of investment into our nation".
The Senate and House of Representatives still need to pass the legislation before sending it to President Donald Trump for his signature.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 8.0%. In China, the Shanghai Composite ended up 2.2%, while the Hang Seng index in Hong Kong is up 3.4%. Â
China has lifted tough restrictions on the province at the epicentre of the coronavirus outbreak on Wednesday after a months-long lockdown as the country reported no new domestic cases.
But there were another 47 imported infections from overseas, the National Health Commission said, as the number of cases brought into the country continued to swell.
China announced Tuesday that the lockdown would be lifted on more than 50 million people in Hubei, with residents now allowed to leave if healthy, with some airports and train stations opening. The city of Wuhan – the initial epicentre of the outbreak – will allow residents to leave from April 8.
There was mixed news out of Italy, with the country's death toll rising by 743 after two days of slight decline from a world-record pace of 793 on Saturday. But officially registered new infections rose just 8% for the second straight day.
The US has the third-highest number of confirmed cases globally, behind China and Italy. More than 700 people have died from the new coronavirus in the US, while the number of confirmed cases is near 54,000, a tracker maintained by Johns Hopkins University showed Tuesday.
Elsewhere, Ireland ordered non-essential businesses shut, Britain planned a 4,000-bed emergency hospital in London, and Spain called for practical support from the NATO military alliance.
Sterling was quoted at USD1.1825 early Wednesday, up from USD1.1743 at the London equities close on Tuesday.
The euro traded at USD1.0818 early Wednesday, up from USD1.0792 late Tuesday. Against the yen, the dollar was quoted at JPY111.20, slightly down from JPY111.49.
In early UK company news, SSP has planned an equity raise in order to ensure sufficient liquidity amid Covid-19 disruption.
Since its February update, the travel concessions operator said it has seen "an unprecedented and rapidly escalating impact of the Covid-19 virus on the travel operating environment, particularly in airports".
SSP operates a number of food and drink brands at travel destinations such as train stations and airports, such as Upper Crust and Cafe Ritazza.
Like-for-like sales are running around 80% to 85% lower in the UK and continental Europe year-on-year. In North America, sales are around 80% lower.
For the month of March, SSP expects revenue to be down around 40% to 45% year-on-year, which will reduce group revenue by GBP125 million to GBP135 million and hit profit by GBP50 million to GBP60 million.
SSP said it will defer the payment date of its final dividend, and it does not intend to pay an interim dividend for 2020. It has also suspended its share buyback.
The firm said it thinks trading conditions will "deteriorate further" and has considered a "very pessimistic scenario" assuming an almost total shutdown of the travel market for the whole of the second half of the financial year, which ends on September 30. This could see revenue slump as much as 85% in the second half on a year ago.
To "to preserve cash and ensure sufficient liquidity", SSP has agreed a new 18-month committed bank facility up to GBP112.5 million, and intends to launch a share placing and subscription. This will not exceed 19.99% of the company's existing share capital.
Directors and members of the senior management team - including the chief executive, chief financial officer and chair - will participate alongside the placing and intend to contribute GBP760,000.
"The net proceeds of the equity placing will be used to strengthen the Company's balance sheet, working capital and liquidity position during this period of unprecedented disruption in the global travel market as a result of the Covid-19 outbreak," said SSP
Housebuilder Persimmon has cancelled its interim dividend of "surplus capital" and postponed its final payout due to Covid-19.
"Whilst the board is disappointed in cancelling the 125p per share payment of surplus capital, the board does not believe it would be prudent at this time to regard this cash as surplus, and the cancellation reflects a change in the board's assessment of the company's financial prospects this year and the broader economic risk profile, in line with the stated policy," said Persimmon.
The firm will reassess the 110 pence final dividend later in the calendar year when the effects of the virus are "clearer".
"Whilst the company's regular annual payment of at least 110p per share has been stress tested for payment through the housebuilding industry cycle, the Covid-19 virus presents an exceptional set of circumstances," Persimmon said.
The firm added that it has a strong balance and it remains confidence in the long-term outlook for the company. Persimmon said that, given the level of uncertainty around economic and business activity, it is not possible to provide guidance for the current financial year.
United Utilities said trading has been in line with expectations for the financial year ending next week.
Revenue is expected to be higher than last year, while underlying operating profit is also expected to rise.
The water works said it does not expect UK storms to result in any material incremental costs, but they did cause some service disruptions, which will reduce its anticipated Outcome Delivery Incentives to around GBP40 million from GBP50 million.
In addition, United Utilities said it has enacted "robust contingency plans" in response to Covid-19.
"Our revenues are fixed under the regulatory revenue control for the next five years, with shortfalls in any year being recoverable in later years. In addition we have a robust liquidity position extending out for 24 months which is at the upper end of our policy range. This means that we are well protected against financial shocks that may be experienced as a result of the outbreak in the short to medium term. However, we recognise that there is a significant degree of uncertainty associated with how the current situation develops and we will therefore continue to closely monitor our position and approach," United Utilities said.
Gold was priced at USD1,613.20 an ounce early Wednesday, lower than USD1,623.30 late Tuesday. Brent oil was trading at USD27.91 a barrel, up from USD27.55.
In Wednesday's economic calendar, there is Germany's Ifo business climate survey due at 0900 GMT with US durable goods orders at 1230 GMT.
By Lucy Heming; [email protected]
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