FTSE 100 advances over 9% as markets bounce back amid US government stimulus hopes
- FTSE 100 index surges to higher close
- US indices higher
- US PMI take pandemic hit
5.15pm; FTSE 100 closes up 452 points
FTSE 100 index closed significantly higher on Tuesday as there was finally some green covering the equity boards.
Britain's blue-chip benchmark closed 452 points higher, or around 9% ahead at 5,446. It was the second biggest daily gain on record. The midcap FTSE 250 also bounced back, adding over 1,094 points, or 8.37% to 14,172 as the UK went through its first day on lockdown.
On Wall Street, the Dow Jones Industrial Average surged over 1,589 points to 20,181 and the S&P 500 gained over 163 at 2,401.
Stock markets were boosted by the prospect of a huge economic stimulus bill being agreed by the US government later today amid the accelerating coronavirus pandemic.
"Recently there has been support from various governments and central banks, but there has been some toing and froing in Washington DC, so traders are waiting to see what the Trump administration will deliver," said analyst David Madden, at CMC Markets.
"In addition to the US, the German government are tipped to post a stimulus package in the near-term too. In light of the awful PMI reports from Germany today, lawmakers must want to be seen to assist the economy."
The German DAX added nearly 11% to 9,700 on the day and the French CAC 40 gained 8.4%.
4.10pm: Footsie goes from strength to strength
So far, there has been no sign of the Footsie doing the sort of swoon that has characterised many attempted rallies this month.
Quite the contrary, in fact, as the index is closed to its intra-day high at 5,320, up 327 points (6.5%).
“Deciding to take a positive view of the days dreadful PMIs, while also benefiting from a statement by the G7, the markets rebounded hard on Tuesday,” said Connor Campbell at Spreadex.
“The G7s financial ministers and central bank heads pledged to do whatever is necessary to protect, and eventually restart, the international economy, promising cooperation on substantial and complementary packages to help out companies struggling in the face of the crisis.
“Suggesting that investors are far more receptive to broad-based governmental strategy than pure central bank monetary policy, the Western markets only intensified their gains as the session went on,” he added.
The oesophageal Doppler monitoring technology company has had trouble getting its foot in the door in the past at the National Health Service but perhaps the current crisis could lead to a change of heart (monitoring).
The days big loser was Hardide Plc (LON:HDD), the industrial coatings specialist. The shares were down 22% at 17.5p; the company has been trying for several years to get its technology used by the aerospace industry – not a sector to be too reliant on at the moment.
3.10pm: US PMI hit by coronavirus
The US manufacturing and services PMI both suffered as they took a coronavirus hit.
The flash manufacturing PMI was 49.2 from 50.7, a 127-month low according to its compiler IHS Markit.
The services index tanked to 39.1 from 49.4, a record low and well below the consensus of 42.
Data was collected between March 12 and March 23, reflecting the crisis brought on by the coronavirus pandemic.
“We are confident that the speed of the collapse now is faster than after the crash of September 2008, at which point the economy had already been in recession for a year; this is an overnight stop,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“We expect a further decline in April, which ought then to be the floor, or close to it.”
According to experts, the services sector took a hard hit immediately but the manufacturing will get a hammering too as long lead items wash through.
Meanwhile, the Footsie bagged 274 points to 5,268 as the pound trimmed its gains, up 1.6% to US$1.1731.
2.10pm: US markets open higher
As expected, Wall Street opened higher, with the Dow Jones up 1,171 points to 19,763 and the S&P 500 up 124 points to 2,361.
Investors are pinning their hopes on a US$2 trillion rescue package for the US economy which Congress failed to agree twice on Monday.
According to Time, top lawmakers said late on Monday night negotiations were about to end.
“We look forward to having a deal tomorrow,” Treasury Secretary Steven Mnuchin told reporters.
Back home, Londons big-cap index gained 230 points to 5,224, while sterling rose 1.8% to US$1.1750.
12.45pm: US indices expected to open sharply higher
US markets are set for a big rebound today after taking a bath yesterday.
The Dow Jones is expected to open at around 19,372, some 780 points higher than last nights close while the S&P 500 is set to open its account 87 points heavier at 2,324.
“As for the Dow Jones, after falling close to 600 points on Monday – unmoved by the Feds latest kitchen sink attempt at monetary policy – the index is set to shoot up,” noted Connor Campbell, although he cautioned that all could change when the US manufacturing and services purchasing managers indices (PMI) are released this afternoon.
“Analysts are estimating 45.1 for the former and 44.1 for the latter, though, as Europe has shown, those forecasts should be taken with a pinch of salt,” Campbell said.
Flash UK PMI drops to record low of 37.1 in March, as the COVID-19 pandemic dealt a more severe blow to the UK economy than during the financial crisis, even before more stringent measures for shops, pubs and restaurants announced last Friday. More here: https://t.co/l6mZjC7JDw pic.twitter.com/F4nMuCgYtV
— IHS Markit PMI (@IHSMarkitPMI) March 24, 2020
As for the UK PMIs released earlier today, the appropriately named Samuel Tombs at Pantheon Macroeconomics sombrely said that the record low levels sign a “very deep recession”.
“The colossal drop in the composite PMI—more than three times bigger than its previous record decline—signals clearly that the economy is hurtling towards a deep recession. The composite PMI even is below its low-point in the 2008/09 recession. It currently is consistent with GDP [gross domestic product] falling at a 2% quarter-on-quarter rate but GDP probably will fall at an even faster rate in Q2, given that the nationwide lockdown has begun today,” Pantheons chief UK economist said.
“Note too that the PMI does not include retailers; non-food retailers struggled with reduced shopper footfall in early March and now are being forced to shut their stores. In addition, the March data do not capture the additional hit to output and activity entailed by school closures, which began this week; responses from firms were collected between February 12 and 20. We judge that the drop in GDP in Q2 will be at least twice as big as currently signalled by Markits PMI, though at this stage the duration of emergency measures to keep people in their homes is anyones guess,” Tombs conceded.
“The only silver lining is that firms do not appear to have rushed to cut employment as rapidly as in the 2008/09 recession. The 44.0 level of the composite employment index points to employee numbers dropping at a relatively mild 1% year-over-year rate soon. The survey also was conducted largely before the government announced that it would cover 80% of the salary of furloughed workers; firms are more likely to keep employees on their books now. Policymakers swift and unprecedented actions to support the economy provide hope that COVID-19 wont inflict massive damage to the economy over the medium-term,” he said.
For now, investors seem happy to drink the happy juice with the FTSE 100 up 196 points (3.9%) at 5,190.
Even allowing for the fact that the purchasing managers surveys can tend to overstate developments at times of significant changing economic and political circumstances, the March PMI points to the #UK #economy nosediving. Clearly headed for very substantial contraction in Q2 https://t.co/pRHvQw4U8d
— Howard Archer (@HowardArcherUK) March 24, 2020
12.05pm: Doubts cast over the CBI industrial trends survey
The total orders balance fell to -29 in March, from -18 in February, according to the latest CBI industrial trends survey.
The reading was well above the consensus forecast of -35, but Pantheon Macroeconomics chief UK economist Samuel Tombs thinks the survey is “almost certainly” understating the damage to the industrial sector from the coronavirus (COVID-19) outbreak.
“Producers are asked simply to state whether orders are above or below normal levels, but they do not have to report the size of any decline in output. The survey also was undertaken in the first half of March, before school closures and other emergency measures which will have prevented workers from attending factories and shops from stocking goods,” Tombs noted.
“Admittedly, output in the food manufacturing and pharmaceuticals sector likely has picked up, due to consumer stockpiling; these two sectors account for 19% of total manufacturing output but once consumers have amassed an initial excess buffer of food and drugs, production should return to prior norms in these sectors. As a result, we would caution against taking comfort from the relatively small deterioration in the CBIs survey in March,” Tombs said.
Howard Archer, the chief economic advisor to the EY ITEM Club, said it was “a disappointing survey”/
“It should be noted that the headline PMI overstates the strength of the manufacturing sector as a marked positive contribution came from a record lengthening of supplier delivery times. This is normally seen as reflecting strong demand and a positive – but in this instance, it was due to the disruption to supply chains stemming from coronavirus,” Archer said.
The FTSE 100 was up 213 points (4.3%) at 5,207 as investors pin their hopes on the US central banks open-ended stimulus scheme and speculation that Germany and the US are preparing rescue packages similar to the one announced in the UK.
House Democrats just introduced their $2.5 trillion coronavirus stimulus package.
The 1,404 page bill: https://t.co/yBZCJH8IJH
The one-page summary ???? pic.twitter.com/Bqq6vRjfIm
— Sahil Kapur (@sahilkapur) March 24, 2020
“Oil has undergone a big move to the upside as traders are hopeful for a generous US rescue package,” said David Madden at CMC Markets.
SP Angel noted that oil prices are also being supported by the weaker dollar that stemmed from the Feds unprecedented measures.
Brent crude for May delivery is up 58 cents to US$27.71 a barrel while sterling is almost two cents higher against the US dollar at US$1.1736.
11.20am: Manufacturing output hit by the coronavirus
The latest CBI industrial trends survey indicates manufacturing output expectations dropped to their weakest since the financial crisis.
The survey was conducted between 25 February and 13 March, just as the coronavirus (COVID-19) outbreak gained pace in the UK and Europe.
The survey of 288 manufacturers reported that both total and export order books worsened considerably in February.
Manufacturing output volumes fell in the three months to March, but at a roughly similar pace to February, the CBI said. Volumes have now fallen for six months in a row.
Nine out of the 17 sub-sectors reported output volumes expanding, led by the chemicals, food, drink & tobacco, and electronic engineering sub-sectors; however, growth in these sectors was offset primarily by a sharp drop in output in the motor vehicles & transport equipment sub-sector.
The bosses pressure group said output prices are expected to rise somewhat in the next three months.
“The manufacturing sector is facing unprecedented challenges due to COVID-19, such as widespread disruption to supply chains and weakening demand due to domestic containment measures,2said Anna Leach, the deputy chief economist at the CBI.
“With expectations for output set to fall in the coming months, its now more important than ever manufacturers get the support they need.
“The Chancellors offer of substantial payroll support, fast access to cash and tax deferral will help prevent job losses and alleviate some strain but all measures must be constantly assessed to ensure the UKs manufacturing sector emerges from this crisis with the minimum possible damage,” she suggested.
UK CBI Total Orders Mar: -29 (exp -35; prev -18)
-CBI Trends Selling Prices Mar: 7 (exp -3; prev -2)
— LiveSquawk (@LiveSquawk) March 24, 2020
Tom Crotty, the group director of privately-owned chemicals company INEOS, who is the chair of the CBI Manufacturing Council, said it is not surprising that manufacturers are feeling the impact of the coronavirus.
“The governments various support measures have been welcome, but it will be essential to keep its response under continuous review to ensure that firms get through the crisis,” he said.
“The outbreak of coronavirus has shone a light on the world-leading expertise and capability of UK manufacturing. The inspiring reaction by manufacturers to the governments drive to produce thousands of ventilators and other essential products and materials is testament to the quality of firms and people in our sector. Manufacturers stand ready to help the country through the current crisis in any way they can,” he declared.
The FTSE 100 was up 199 points (4.0%) at 5,193.
10.10am: Investors shrug off record low PMI readings
The FTSE 100 reacted phlegmatically to the latest purchasing manager surveys from CIPS/IHS Markit.
Londons index of leading shares, in fact, pushed a little higher following their release, rising to 5,209, up 215 points (4.3%), some 25 points higher than it was at the time of the release of the surveys.
“The surveys highlight how the COVID-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis. With additional measures to contain the spread of the virus set to further paralyse large parts of the economy in coming months, such as business closures and potential lockdowns, a recession of a scale we have not seen in modern history is looking increasingly likely,” warned Chris Williamson, the chief business economist at IHS Markit.
"Historical comparisons indicate that the March survey reading is consistent with GDP [gross domestic product] falling at a quarterly rate of 1.5-2.0%, a decline which is sufficiently large to push the economy into a contraction in the first quarter; however, this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter as further virus containment measures take their toll and the downturn escalates.
"Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare. Demand elsewhere has collapsed, both for goods and services, as increasing numbers of households and businesses at home and abroad close their doors," Williams concluded.
Duncan Brock, the group director of the Chartered Institute of Procurement & Supply (CIPS), said: “the shock of this deepening global health crisis has flung businesses into the abyss”.
"The services sector received the largest blow as citizens reduced their social activity and leisure activities were abandoned. The sector recorded its worst drop in activity since 1996 when the survey began. New orders also took a significant hit as the rapid realisation of the significance of COVID-19 applied an abrupt brake on consumer-facing businesses,” Brock said.
"Shortages of manufacturing components following global factory closures dislocated manufacturing supply chains and led to the greatest lengthening of delivery times since the index began in 1992. A surge in demand for food and pharmaceutical products led to rising output in some parts of the manufacturing sector, but this was more than offset by a slump in production elsewhere.
"As more serious measures are considered by the UK Government, the effect of coronavirus on businesses will get much worse. Even with interest rates cuts and an injection of cash into the economy to support struggling businesses, the inevitable rise in unemployment is sure to follow along with business failures especially amongst SMEs,” he added.
9.45am: Equities buoyant as investors dare to hope
Londons leading shares are enjoying a rare spell in the sun; its a shame they are only allowed it once a day.
The price of Brent crude for May delivery has risen US$1.50 to US$28.52 a barrel.
“Markets rebounded in early trading today following last nights announcement of an effective UK lockdown, something most UK policymakers have been pushing for the last week as the nation tries to reduce the spread of the virus,” said Joe Healey, an investment research analyst at The Share Centre.
“For the last few weeks we have said the primary data markets are reacting to, is the number of new cases and deaths rather than monetary and fiscal policy. This highlights our view some investors are starting to see light at the end of the tunnel. Of course, there remains uncertainty ahead but it seems we are starting to take steps in the right direction for the UK economy,” Healey said.
Adding to the cautious sense of optimism was an indication that the rate at which new cases of infection are growing in Italy is slowing.
“All of this is also coming alongside yesterdays announcement the Fed is willing to do whatever it takes, something that helped prop up Asian markets earlier today and news that Hubei, the epicentre of the outbreak has started to relax travel restrictions which could either be a key milestone in the virus saga for good or for worse,” Healey sugged.
Meanwhile, the IHS Markit / CIPS Flash UK Composite Purchasing Managers Index (PMI) for March did not make for pleasant reading.
The composite output index in March fell to an all-time low of 37.1 from Februarys 53.0; a level below 50 indicates a contraction in activity.
The services business activity index also fell to a new low, of 35.7, from Februarys reading of 53.2.
The UK manufacturing output index dropped to a 92-month low of 44.3 from Februarys 52.2 while the UK manufacturing PMI hit a three-month low of 48.0, following on from Februarys 51.7.
“March data highlight that the COVID-19 outbreak has already dealt the UK economy a more severe blow than at any time since comparable figures were first available over 20 years ago,” said IHS Markit Economics, which compiles the data.
8.25am: Positive start
The FTSE 100 recouped some of the ground lost on a bloodbath start to the week as G7 finance ministers prepare to discuss an enhanced coronavirus response – but not quite as much as expected.
The index of UK blue-chip stocks rallied 133 points to 5,126.78 The spread betters were predicting a rise of around 220 points. Instead, the advance was just over half of that.
In Asia, the markets there rallied after the US Federal Reserve launched unlimited quantitative easing; compensation for the fact that US lawmakers failed to agree a US$2 trillion economic aid package.
"The Federal Reserve went all-in yesterday, opening the taps on an unlimited asset purchase programme that will for the first time include corporate bonds as well as US government debt," said Neil Wilson senior analyst at Markets.com. "There were other measures in a broad package of support for companies that goes about as far as its possible to go."
Later Tuesday finance ministers and central bankers of the worlds seven largest economies will have a call to discuss responses to and the economic impact of coronavirus.
On a busy day, the Eurogroups 19 finance ministers will also assess how to use a bailout fund called the European Stability Mechanism.
“Possible common issuance of so-called corona bonds is to be on the agenda as well,” said Danske Bank.
Prudential (LON:PRU), the savings and pensions group that invests heavily in the currently bombed-out international stock markets, found some support on a day of stability for the worlds bourses. It advanced 15% early on.
Not far behind was the London Stock Exchange (LON:LSE), up 11%, which appears to have staved off the threat of a stock market shutdown.
Is there talk of a bailout for the airlines? If not, there are obviously a few rather brave investors out there willing to get behind British Airways owner IAG (LON:IAG), which taxied ahead 7.9%.
Proactive news headlines:
MaxCyte Inc (LON:MXCT) has signed a licensing deal with a company developing the next wave of cancer immunotherapies. Allogene Therapeutics Inc (NASDAQ:ALLO) will use MaxCytes Flow Electroporation platform and ExPERT technology to “develop and advance” its allogeneic CAR T treatments. MaxCyte will receive “undisclosed development, approval and commercial milestones in addition to other licensing fees”.
Learning Technologies Group PLC (LON:LTG) has reported profits for its 2019 financial year are “ahead of expectations” as recurring revenues surged thanks to its Software & Platforms business. In a trading update, the AIM-listed firm reported that for the year ended 31 December statutory pre-tax profit was £14.3mln, 316% ahead of the prior year, while revenues jumped 39% to £130.1mln.
Minds + Machines Group Limited (LON:MMX) said the momentum it experienced at the end of 2019 has continued into the first quarter of 2020, and, as a result, it plans to press ahead with its share buyback programme even during this current coronavirus crisis. The internet top-level domain provider said in late January that revenue for 2019 would be “significantly ahead” of 2018 and so it proved, with Tuesday's full-year results statement revealing that revenue was up 25% to US$17.3mln from US$12.4mln in 2018.
Tekcapital PLCs (LON:TEK) portfolio firm, Salarius, has received an order from its distribution partner to launch its SaltMe! Range of low-sodium snack products across 71 stores in May. The launch of the crisp range represented “an important milestone for SaltMe!”, the investment firm said on Tuesday, adding that “thousands of customers” will now be able to buy the new crisp range, which uses Salarius MicroSalt particles for flavouring.
OptiBiotix Health PLC (LON:OPTI) has extended its agreement with a distributor called Extensor Robert Buczek to a further 15 Eastern European and Central Asian countries. Originally the tie-up with Extensor for its GoFigure consumer weight management product and functional ingredient SlimBiome covered Poland only. The enhanced deal will see GoFigure taken to Ukraine, Estonia, Lithuania, Latvia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Armenia, Azerbaijan, Georgia, Belarus, Moldova and Russia.
Oriole Resources PLC pared its losses to £1.41mln for the year to 31 December 2019, significantly down on the £2.25mln loss it booked in 2018. The savings were won by an increased focus on costs. In response to the current global situation relating to COVID-19, and with Cameroon's borders closed, Oriole said limited exploration work is expected in the next three months. Consequently, its directors and senior management have taken reduced salaries for this period, in order to preserve the company's cash reserves in anticipation of the proposed drilling campaign later in the year.
Anglo African Oil & Gas PLC (LON:AAOG) has announced new terms for the divestment of its Congo assets to Zenith Energy Ltd (LON:ZEN). The top-line deal value reduces to £800,000 from £1mln, but, the consideration will now be paid entirely in cash, whereas the original deal saw AAOG received £500,000 cash and £500,000 of Zenith shares. The group said the cash will be paid to AAOG in ten equal instalments.
BlueRock Diamonds PLC (LON:BRK) said it will close its Kareevlei mine as a result of a nationwide order in South Africa to shut down the mining industry. BlueRock has also removed its stones from its March diamond tender, due to an absence of international bidders.
Tlou Energy Ltd (LON:TLOU) has decided to significantly reduce costs in response to the difficult prevailing market conditions, triggered by the coronavirus (Covid-19) pandemic and lower oil and gas prices. The aim, the company said in a statement, is to make current funds last longer so that more time is available to conclude ongoing commercial and project finance negotiations.
Angling Direct PLC (LON:ANG) has said its retail stores are closed until further notice but its online offering remains operational as the coronavirus pandemic shut-down takes effect. The largest specialist fishing tackle and equipment retailer in the UK has shuttered its shops in compliance with the governments overnight directive. It noted the measures of support that have been put in place by the government and expects to be a beneficiary of all that are applicable to the company.