After falling more than 4% on Friday, S&P500 stock-index futures were ‘limit down’ in Asian trading on Monday, rattled by the coronavirus pandemic and a delay in Washington over an economic rescue package.
In Asia, stock markets fell sharply with benchmarks in Australia, Hong Kong and South Korea down over 5% after the number of confirmed virus cases world-wide more than doubled in a week to nearly 330,000.
Infections in the U.S. topped 32,000, 10 times the number of a week earlier, but a $1.3tn stimulus package for the economy was held up in the Senate on Sunday, sending futures and markets tumbling.
EUROPE ON ALERT
European investors will find out this week how much the coronavirus has impacted the economy, with the euro-area consumer confidence index to be published today, and French, German and UK preliminary or ‘flash’ purchasing managers’ surveys (PMIs) published on Tuesday.
Bloomberg Economics is forecasting a contraction in euro-area economic growth of more than 3% this quarter and 2.4% in the second quarter which would be the worst consecutive drops in the zone’s history.
In an echo of Mario Draghi’s speech at the height of the euro-zone crisis, European Central Bank president Christine Lagarde has pledged ‘There are no limits’ to the bank’s support for the economy.
UK DIVIDENDS BEING CUT
The FTSE 100 index fell 4.5% to 4,955 in line with other European markets, with the biggest damage in household goods, personal goods, property, transport and technology stocks.
Media group ITV (ITV) was one of the biggest fallers, down 10% to 56.6p after it warned that it had seen ‘further deferrals in advertising which are now coming from across the advertiser categories rather than just in travel’ and therefore couldn’t give guidance for March or April.
The firm said that, over a full year, each 1% fall in ad revenues reduces revenue and profit by around £17m before any moves to cut costs.
Although most of its costs are variable rather than fixed, given the uncertainty it withdrew its earnings guidance for 2020 and passed on both its 5.4p final dividend for 2019 and its proposed 80 per share dividend for 2020.
Bus and rail operator Go-Ahead Group (GOG) was a rare gainer, adding 5.5% to 686p after it provided an update on the coronavirus situation, including a ‘significant’ reduction in local bus services and the suspension of its 30.17p interim dividend.
It is in talks with the Department for Transport over support for rail operators and it expects a decision on a potential Direct Award Contract for Southeastern by the end of the month.
Rival operator Stagecoach (SGC) fared less well, falling 7.7% to 56.6p after it said that regional bus passenger numbers were down by between 40% and 50% and it would therefore miss its earnings forecasts.
Its London buses had also seen a drop in numbers and it was in discussions with Transport for London about how to mitigate the drop in revenues. In common with Go-Ahead it announced it would omit its dividend for the current financial year.
Temporary power supplier Aggreko (AGK) warned that although the impact of coronavirus on the group had so far been limited, ‘there is now significant uncertainty around future demand across several sectors and geographies.’ It added that the recent sharp fall in the oil price had ‘compounded this level of uncertainty.’
For the time being the International Olympic Committee has not decided to postpone or cancel the Tokyo 2020 games, which is a flagship event for Aggreko. Like many other firms, it decided to withdraw its dividend in order to preserve cash. Shares dropped 6.5% to 341p.
Food to fashion group AB Foods (ABF) announced that as well as closing its Primark stores overseas last week, leading to the loss of 30% of sales, it decided to close all its UK stores on Sunday causing the loss of another 40% of sales.
It now expects lost sales of £650m a month, although it estimates it can recover half of its operating costs and has stopped placing new orders with suppliers in order to conserve cash. Shares fell 8.2% to £16.14
Shares in specialist retailer Watches of Switzerland (WOSG) fell 11.7% to 187p after it lowered its revenue forecast for the year to 26 April to around £810m after it closed all its US and UK stores. The firm is reducing working capital and cutting discretionary spending to conserve cash.
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