The FTSE 100 jumped in early morning trading as the UK government extended its Bank of England overdraft so it can borrow billions and bypass the bond market.
The government has extended what’s known as its ‘Ways and Means’ facility at the central bank.
This allows it to immediately raise funds and smooth out cash flow as it tries to support the economy amid the coronavirus pandemic, which according to reports it felt it couldn’t do quick enough via the gilt market.
The UK’s benchmark index rose 2.2% on the news to 5,809.42, while rising optimism appears to have become of other stock markets too.
The Hang Seng in Hong Kong is up 1.3% today and the Shanghai Composite in China up 0.4%, while the Nikkei 225 in Japan is trading broadly flat.
In commodities, oil rallied on hopes that a deal will be reached at the upcoming OPEC meeting to reduce the glut of supply flooding the market and stabilise near-term prices. Brent crude futures were up 3% to $33.80 a barrel, while West Texas Intermediate (WTI) futures, another oil price benchmark, were trading 5.6% higher at $26.50 a barrel.
DIAGEO PULLS GUIDANCE AND SHARE BUYBACK
In company news, alcoholic drinks maker Diageo (DGE) gained 3.3% to £26.04 after it pulled its guidance and said it would halt its share buyback programme, as government measures worldwide to contain the virus had impacted performance across its markets, including in the US, Europe, India and Africa.
Diageo said it would withdraw its guidance on group organic net sales growth and organic operating profit growth for 2020, citing a lack of visibility over the duration and severity of the coronavirus pandemic.
The company also said it would not initiate the next phase of the three-year £4.5bn buyback programme for the remainder of 2020 after completing the first phase of £1.25bn.
REDROW BAGS £300M CORONAVIRUS SUPPORT
Housebuilder Redrow (RDW) jumped 9.4% to 443p as it secured a £300m Covid Corporate Financing Facility (CCFF) and confirmed it had furloughed 80% of its workforce under the government’s job retention scheme.
Redrow announced it has been confirmed as an eligible issuer for the CCFF, with an issuer limit under the facility of £300m, which remains undrawn.
The company also said that negotiations for an additional £100m of headroom under its existing revolving facility (RCF) with its six relationship banks were ‘progressing well’, with documentation to be concluded by the end of April, which will result in the existing RCF increasing from £250m to £350m.
MONDI SCRAPS DIVI, VIRUS ‘DIFFICULT TO PREDICT’
Packaging company Mondi (MNDI) edged 0.8% higher to £13.59 after it scrapped its final dividend for 2019 on coronavirus uncertainty, as first quarter underlying earnings declined.
In a trading update for the period since the end of last year, the group reported underlying EBITDA of €385m, 18% below the comparable prior year period of €471m, driven mainly by lower pricing across its key paper grades.
Mondi confirmed most of its facilities have been in operation throughout the period but said the potential impacts of coronavirus remained ‘very unclear and the pace of change means any effect on operations and the group’s financial performance for the year are difficult to predict.’
WAGAMAMA OWNER RAISES £57M
Wagamama and Frankie & Benny’s owner The Restaurant Group (RTN) jumped 10.9% to 66.5p after it raised £57m through a share placing to help see it through the coronavirus pandemic.
The placing price of 58p represented a 3.2% discount to yesterday’s closing price of 59.9p.
In a statement the company said: ‘The placing is expected to provide sufficient liquidity for the company to deal with this challenging environment and enable it to continue to operate, where possible, through this extraordinary period whilst ensuring that it is well positioned for the eventual normalisation.’
OTHER COMPANY NEWS
Oil company Enquest (ENQ) was up 19.8% to 13.28p after it reported a pre-tax loss of $729.1m, compared with a profit of $94.0m on-year for 2019, while revenue rose to $1,711.8m from $1,201.0m.
It said that year-to-date production performance remained good with the group's day-to-day operations continuing without being materially affected by Covid-19.
Asset manager Polar Capital (POLR) has been boosted 4.2% to 416.97p as it announced that recent equity market volatility has hit assets under management, which fell 12% over the year to £12.2bn at the end of March 2020.
Smith & Nephew (SN.) has been buoyed 1.8% to £15.29 as it confirmed the appointment of a new chief financial officer to replace outgoing Graham Baker.
Anne-Francoise Nesmes will join the company as chief financial officer by 3 August 2020, from Merlin Entertainments.
