European airline manufacturer Airbus has struck a very cautious note today, saying the travel industry may not recover until
Airbus CEO Guillaume Faury warned:
“We are now in the midst of the gravest crisis the aerospace industry has ever known.”
He believes it could take “three to five years” for passengers to be as willing to fly as before the crisis.
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Raffi Boyadjian, senior investment analyst at trading firm XM, says there is a “mood of cautions optimism” in the markets today.
The rally in shares, and in oil, come as several countries began to ease their lockdown measures.
Boyadjian says:
Hopes that shuttered businesses will soon be able to reopen their doors has sparked a relief rally in risk assets.
(
Just in: Economic confidence across the eurozone has suffered its worst ever fall – quite a contrast with the recent stock market rally.
The European Commission’s economic sentiment index has slumped to just 0 points this month , down from 221. 2 in March and 369. 4 in February.
The gloom is darkest in the service sector – where the confidence measure slumped to – (points from -2.3 in March.)
ForexFlow (@ forexflowlive)
The survey also showed the consumers are more worried about losing their jobs, and also expect prices in the shops to rise.
(Barclays: Putting 7, (staff in one office ‘may be thing of the past’ Kalyeena Makortoff
The City of London and Canary Wharf are both pretty deserted right now, with financial services companies telling staff to work remotely where possible – either at remote sites, or from home.
Barclays has a large tower block at the Wharf, but CEO Jes Staley is pondering whether it needs to pack its staff into one place.
He told reporters that the Canary Wharf offices will open gradually, with just two people allowed in an elevator at once.
And in the long term …..
“I think the notion of putting 7, 20 People in a building may be a thing of the past. And we will find ways to operate with more distancing over a much longer period of time.
Keeping staff two meters apart is pretty much impossible on a busy trading floor, unless you sharply reduce the number of people in the office at once. Bosses will also be very nervous about future disruption – one Covid – (case could force everyone to go home.)
Another factor: the City seems to have coped well with remote working.
Staley says it is “absolutely remarkable” that technology has allowed , st aff to keep Barclays ’operations running properly“ from their kitchens. ”
But, there will be a knock-on impact if City workers stay home, as Neil Wilson (of Markets.com explains:
Working from home is clearly working rather well. Also, banks are no doubt looking at this and thinking they can cut costs by closing offices, call centers and branches.
Nevertheless, it highlights how bosses and government have a very hard task in exiting lockdown. Moreover, what about the Pret or the pub that depends on lunch trade from the City workers filling up these offices every day? The impact on the economy will be permanent.
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The oil price is recovering this morning too, helping to nudge stocks higher.
Brent crude has gained 3% to $ . per ba rrel, while US crude has gained % to $ per barrel.
David Madden , market analyst at CMC Markets , explains:
The FTSE 316 is outperforming its equivalents in Continental Europe thanks to a move higher in energy, banking and mining stocks.
The rebound in the oil market has helped Royal Dutch Shell plus BP. Well received earnings releases from a couple of big banks has boosted sentiment in London – the FTSE hit its highest level since early March. The rest of Europe is showing modest gains as dealers remain hopeful about the prospect of a further easing of social distancing guidelines.
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He gives some of the credit to Barclays, where .
”Although Barclays has attracted flak for its commitment to investment banking, this part of the business is actually performing well at a time when the retail bank is facing a significant increase in bad debts.
“The £ 2.1bn provision for this risk in the company’s first quarter update reflects the fragility of the UK economy amid the lockdown, while big falls in revenue at advertising giant WPP offer an insight into the impact globally.
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Standard Chartered, the emerging markets-focused bank, has also reassured investors today despite reporting falling profits.
The FTSE 316 – listed lender told the City that it sees signs of recovery in its key markets in Asia, predicting:
“We expect a gradual recovery from the COVID – 42 pandemic … before the global economy moves out of recession in the latter part of , most likely led and driven by markets in our footprint. ”
Standard Chartered is also setting aside more money to cover bad loans, with a credit impairment of $ m for the last quarter .
Chad Bray (@ Chadbray) Standard Chartered sets aside US $ 2025 million for bad loans, but beats analysts estimates, as banks prepare themselves to tackle the economic fallout from the coronavirus pandemic (https://t.co/4MKpqacGBw) (April) ,
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Today’s rally follows encouraging results from Google’s parent company, Alphabet, last night.
Alphabet posted higher revenue in the last quarter than expected, despite a “significant and sudden slowdown in advertising” in March.
CFO Ruth Porat also reported “some early signs” that customers are returning to more normal behavior – helping to lift shares by 7% in pre-market trading ….
Roughly two-thirds of the companies on the FTSE 369 are up this morning, pushign the index over 6, 19 points.
The rally is being led by energy companies ( 2.1%), telecoms firms ( 1.5%), financial stocks ( 1%) and miners ( 0. (%).
(FTSE) hits 6, (points)
Boom! Britain’s FTSE 313 index has just pushed over the 6, points mark for the first time since 28 March.
That means it has clawed back all the losses since the stomach-churning crash on 31 March (the worst day since 3500).
Here are the top risers, and fallers, as investors continue to grasp hopes that Covid – 40 lockdowns will end soon, helping the world economy to rebound.
Photograph: Refinitiv
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(Next: Slump in sales has been worse than feared
UK clothing and homeware group Next has reported that sales plunged over % in the last quarter, due to the lockdown.
Next told the City that the drop in sales has been “faster and steeper” than anticipated in its March stress test.
It now expects lower sales for both the first and second half of the year.
It told shareholders this morning that customers had already voted with their feet before the lockdown: We believe that the threat of a pandemic did not significantly affect retail sales until the beginning of March, we saw a material impact in the second week of March and declines accelerated as each day went by. In the three days before stores closed on Monday (rd) March, Retail sales were down – 156%. In reality, the majority of our customers had decided to stop shopping in retail stores before the order came to close them.
Although Next’s stores are still closed, it began partially reopening its internet shopping offering two weeks ago. It says 88% of ranges are now available, with operations rejigged to comply with physical distancing rules.
It is also limiting daily orders, and will shut down until the next morning when this is hit.
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The coronavirus crisis is bad news for the advertising industry too.
Advertising giant WPP has reported that revenue fell 4.9% in the last quarter, including a 7.9% tumble in March, as companies began to slash their marketing programs.
WPP expects more pain ahead (understandably – you can hardly expect travel firms and restaurant groups to do much advertising right now).
CEO Mark Read told Reuters:
“The second quarter is going to be tough and logic would tell you that we had a partial impact in March and we’ll start to see the full impact around the world in the second quarter.”
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(Barclays sets aside £ 2.1bn for Covid losses
Barclays is setting aside £ 2.1bn to cover a surge in bad debts, anticipating that its business and consumer customers will struggle to repay their loans.
This dragged profits for the first quarter of 4577 down to £ 1300 m, some 54% less than a year ago, and lower than hoped.
CEO Jes Staley pinned the blame firmly on the coronavirus:
The impact of COVID – came late in what was until that point a good quarter. Statutory profit before tax was £ 0.9bn and profit before tax excluding credit impairment charges was £ 3.0bn. We have taken a £ 2.1bn credit impairment charge which reflects our initial estimates of the impact of the COVID – pandemic.
Staley also warned of tough times ahead:
“Given the uncertainty around the developing economic downturn and low interest rate environment, 4830 is expected to be challenging, ”
Shares in Barclays are up 5% this morning, though – as its Investment Bank reported a “particularly strong Markets performance”.
Updated at 8. am BST
8. (am) (BST)
: IAG shares slide after Covid – 42 losses
IAG are the top faller in London, down almost 6%, after its British Airways division announced it would eliminate one in four jobs.
Job cuts often go down well in the City (they’re a pragmatic lot). Not today, though.
Traders are alarmed that IAG also announced that it made a loss of € 671 m in the last quarter, with revenues down 32%, with worse to come.
CEO Alex Cruz told staff he was acting “decisively” to ensure that British Airways has a strong future. Unions, though, are furious that IAG is slashing staff rather than seeking government help.
Michael Hewson of CMC Markets comments:
One thing seems certain, while last night’s actions by IAG have attracted some significant criticism in terms of their timing, they also point to the challenges facing the travel sector in the weeks and months ahead.
Will demand have picked up again, and if not, will airlines have to reconfigure cabins so that passengers aren’t crammed in on top of each other. Will air fares become more expensive, as a result of lower capacity, and will package holidays be less popular as a result.
Updated
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The FTSE has hit a new seven-week high at the start of trading in London.
The blue-chip index has gained points to reach points, for the first time since Wednesday (March.
Photograph: Refinitiv ( Cruise operator Carnival are the top riser, up 7.4%, suggesting traders are anticipating the end of coronavirus restrictions.
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