US stocks fell for the fourth day running on Monday with the Dow Jones Industrials index falling more than 900 points at one stage. That sent Asian markets lower overnight as concerns grow over the widespread resurgence in Covid cases and the prospect of further damage to the world economy. Meanwhile volatility indicators rose and bonds rallied as investors sought safety.
Despite the decidedly ‘risk-off’ mood in markets, the dollar gained against global currencies as traders unwound some of their short positions, while oil prices stabilised at $41.30 after falling 4% yesterday on fears of oversupply. Gold steadied at $1,916 an ounce after dropping 2% yesterday.
The FTSE 100 index staged a tentative recovery from yesterday’s 3.4% drubbing, rising 25 points or 0.4% to 5,829 in early trading, with defensive sectors such as retail, software and tobacco contributing to the gains.
BETTER EARNINGS
In company news, DIY retailer Kingfisher (KGF) announced strong first half results for the period ended 31 July with organic turnover down just 1% thanks to a 164% increase in online sales, which have more than doubled as a proportion of group revenues.
Adjusted pretax profits were up 23% to £415 million and free cash flow was over £1 billion thanks to higher operating profits and a steep drop in working capital. As a result, the firm’s net debt to EBITDA ratio halved to just one, well below the medium-term target level. Shares responded positively, gaining 6% to 281p.
Drinks maker AG Barr (BAG) posted a relatively positive first half update with revenues down 7.6% but the firm’s value share of the UK soft drinks market rising.
Adjusted first half earnings were up 19.4% to £16.6 million while the operating margin rose strongly to 15.1% helped by cost control measures. The firm is holding fire on dividends but is confident of meeting its full year earnings targets. Shares ticked up 0.8% to 388p.
JOBS AT RISK
Premier Inn owner Whitbread (WTB) reported that 98% of its hotels had reopened by the end of the first half and that trading was ahead of the market thanks to strong demand in tourist locations.
Its restaurant performance had also been helped by the Eat Out to Help Out scheme with August UK total sales (accommodation and food and beverage) down 38.5% on last year.
However, the firm said that with market demand expected to remain low in the medium terms it was looking to lay off up to 6,000 people or 18% of its total workforce in order to cut costs. Shares dropped 5% to £20.04
Travel operator TUI (TUI) posted a downbeat trading statement for the year to 30 September with summer booking down 83% and average selling prices down 19%.
The firm said it had ‘been impacted by continuous changes in travel advice by various governments across our markets’ over the last month, meaning it has had to cut capacity and the number of destinations it serves.
It also confirmed it would lay off up to 8,000 staff in order to reduce its annual overhead costs by 30%, adding to the number of people losing their jobs. Shares added 2% to 276p.
HIGHER CLAIMS
Insurer Beazley (BEZ) doubled its estimate of the cost of Covid claims from $170 million to $340 million net of reinsurance as major events and conferences continue to be cancelled.
The firm said ‘we made a number of assumptions including that events would resume in September this year which would lead to a normalisation in the levels of contingency claims. Given the evolving status of Covid-19 we no longer expect this to be the case.’ Shares fell 13% to 339p.
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