The FTSE 100 plunged 2.46% in early trade to 5,755.87 as UK manufacturing output looks set to record its sharpest drop since records began in 1992.
It looks like bad economic data as a result of the coronavirus pandemic is finally starting to catch up with the stock markets.
US and European markets all closed lower yesterday as the number of jobless Americans topped 30m and France and Italy entered recession, with earnings also hit as Apple and Amazon reported disappointing numbers.
Today the spotlight is on the UK, with the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) giving an insight into the toll the pandemic is having on factories.
Preliminary estimates showed the PMI falling to 32.9 in April, down from 47.8 in the previous month and below market consensus of 42.
Any figure above 50 signals expansion and anything below 50 contraction. April’s reading looks set to be the steepest contraction since the survey began in 1992.
The sharpest drop in output is set to be recorded in the textiles and clothing sector, largely reflecting collapsed demand from the retail sector, though in the transport sector, including car production, there is also expected to be a steep decline.
While Western stock markets tumble, it’s a different story in some Asian markets. China’s Shanghai Composite is currently around 1.33% higher and Hong Kong’s Hang Seng is 0.3% up having rallied earlier in the day, though Japan’s Nikkei 225 plunged 2.84%.
RBS PROFIT PLUNGES AS BORROWERS STRUGGLE TO REPAY LOANS
In company news, Royal Bank of Scotland (RBS) gained 2.1% to 113p, even as it reported a 59% slump in first-quarter profit owing to borrowers struggling to repay loans amid the coronavirus crisis.
The lender’s bottom line profit for the three months through March dropped to £288m, down from £707m on-year.
Underlying operating profit fell 49% to £519m, as impairment losses jumped to £802m, up from £86m.
For the full year, the bank said it expected impairment loss rates to be ‘meaningfully higher’ than its guidance of below 30-to-40 basis points.
‘The impacts of Covid-19 and the mitigating benefits of government schemes are uncertain and challenging to forecast accurately,’ RBS said.
AIRLINES SLUMP ON RYANAIR NEWS
Ryanair said demand may not fully recover from the coronavirus crisis for at least two years. It also warned a planned restructuring could result in the ‘loss of unpaid leave’ and involve pay cuts of up to 20%.
The gloomy update reverberated throughout the airline sector, with EasyJet (EZJ) falling 5.7% to 568p.
British Airways owner International Consolidated Airlines (IAG) descended 4.6% to 211p, even as Spanish subsidiaries Iberia and Vueling secured syndicated loan agreements for €750m and €260m, respectively.
BARRATT PLANS PHASED RESTART
On the positive side, Barratt said it would carry out a phased return to work on its construction sites from 11 May.
Sites would open initially to implement the changes required under new working practices and protocols, and be followed by a phased return to construction, with 180 sites - around 50% of the total - in the first phase.
‘We do not plan to restart work on our sites in Scotland at this time and will keep this position under review,’ Barratt said.