FTSE gains 9% in one of best sessions on record
Performance of FTSE 100 on 24 Mar 2020
Source: Google Finance
The FTSE 100 has surged 452 points today as investors reacted positively to the UK’s lockdown and the vast amount of monetary and fiscal stimulus that has been unleashed to combat the impact of coronavirus.
The blue-chip index rose 9.05 per cent during Tuesday’s session to end the day at 5,446 points. While this still leaves the FTSE far off the levels it was just a few weeks ago, today’s rise is one of its strongest since the global financial crisis of 2008.
Today marked the highest daily points gain that the FTSE 100 has ever witnessed as well as its second best percentage rise on record.
Performance of FTSE 100 members on 24 Mar 2020
Source: London Stock Exchange
As the heatmap above shows, most members of the FTSE 100 had a strong session, with only four stocks falling. Cruise operator Carnival was up more than 28 per cent but oil companies also made healthy gains after oil prices showed some sign of improvement.
It was a strong day all round for equities, with the Dax up almost 11 per cent and Italian, Spanish and French indices also gaining more than 8 per cent. US markets are also rising rapidly today.
Tokyo 2020 Olympics postponed to 2021
The Tokyo 2020 Olympic and Paralympic Games have been postponed because of the coronavirus pandemic.
The event was due to start on 24 July but will now take place “no later than summer 2021”, a joint statement from the organisers of Tokyo 2020 and the International Olympic Committee said today.
“In the present circumstances and based on the information provided by the WHO today, the IOC president and the prime minister of Japan have concluded that the Games of the XXXII Olympiad in Tokyo must be rescheduled to a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community,” the statement said.
“The leaders agreed that the Olympic Games in Tokyo could stand as a beacon of hope to the world during these troubled times and that the Olympic flame could become the light at the end of the tunnel in which the world finds itself at present. Therefore, it was agreed that the Olympic flame will stay in Japan. It was also agreed that the Games will keep the name Olympic and Paralympic Games Tokyo 2020.”
There had been growing pressure for the event to be cancelled or postponed, given the bans on mass gatherings in many parts of the world as governments attempt to slow the spread of coronavirus. Several sporting events have already been put on hold, include the UK’s football season and the London Marathon.
Jeremy Osborne, investment director on Fidelity Japan Trust, said: “From an economic perspective, the postponement of the Olympics is clearly less negative than cancelling the games outright.
“One of the major beneficiaries of the Olympics is the construction industry, but Olympics related building work is already completed. The tourism and hotel industries would be negatively affected in the short term, but this is insignificant compared to the impact of the global Covid-19 pandemic. Therefore, the effects of postponement in isolation are relatively limited in the near term.”
“The UK economy is hurtling towards a deep recession”
On the massive fall in UK business activity, Pantheon Macroeconomics chief UK economist Samuel Tombs said: “The colossal drop in the composite PMI – more than three times bigger than its previous record decline– signals clearly that the economy is hurtling towards a deep recession.
“The composite PMI even is below its low-point in the 2008/09 recession. It currently is consistent with GDP falling at a 2 per cent quarter-on-quarter rate. But GDP probably will fall at an even faster rate in Q2, given that the nationwide lockdown has begun today. Note too that the PMI does not include retailers; non-food retailers struggled with reduced shopper footfall in early March and now are being forced to shut their stores. In addition, the March data do not capture the additional hit to output and activity entailed by school closures, which began this week; responses from firms were collected between February 12 and 20.
“We judge that the drop in GDP in Q2 will be at least twice as big as currently signalled by Markit’s PMI, though at this stage the duration of emergency measures to keep people in their homes is anyone’s guess.”
UK businesses activity heading for worst slump on record
Business activity across the UK is slumping at a record pace in the wake of the coronavirus crisis, according to closely watched purchasing managers’ indices (PMIs).
Today’s ‘flash’ IHS Markit/CIPS Flash UK Composite PMI shows a steep decline in business activity with the index falling to 35.7 points in March – down from 53 points in February.
The composite PMI is a weighted average of the activity in manufacturing and services sectors and is used for current and future insights on business conditions. A reading below 50 indicates that most businesses reported a deterioration compared to the previous month.
This is the lowest the composite PMI has been since it was started in 1998, while March’s combined monthly decline in output across manufacturing and services recorded exceeded that seen at the height of the 2008 global financial crisis.
Services business activity suffered the biggest downturn to 35.7, a survey-record low, from February’s 53.2; what’s more, these figures were compiled before pubs, restaurants and other businesses were told to shut.
The manufacturing output fared a little better with the index now at 44.3 down from last month’s 52.2.
Chris Williamson, chief business economist at IHS Markit said: “The surveys highlight how the Covid-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis. With additional measures to contain the spread of the virus set to further paralyse large parts of the economy in coming months, such as business closures and potential lockdowns, a recession of a scale we have not seen in modern history is looking increasingly likely.
"Historical comparisons indicate that the March survey reading is consistent with GDP falling at a quarterly rate of 1.5-2.0 per cent, a decline which is sufficiently large to push the economy into a contraction in the first quarter. However, this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter as further virus containment measures take their toll and the downturn escalates.
"Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare. Demand elsewhere has collapsed, both for goods and services, as increasing numbers of households and businesses at home and abroad close their doors."
“The data give real grounds for hope”
Source: Pantheon Macroeconomics
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “The two straight daily declines in the number of new cases and deaths in Italy are consistent with the patterns in the data in China and Korea two weeks after stringent measures were applied there. This doesn't mean we can be sure the downshift in Italy will continue, but the data give real grounds for hope.”
EU PMIs show “a steep economic downturn and a recession is coming”
On the heavy fall in purchasing managers’ indices for the eurozone, Premier Miton chief investment officer Neil Birrell said: “The French and German PMIs out this morning were generally much worse than expectations and clearly show a collapse in activity.
“The Eurozone Composite PMI fell to 31.4 from 51.6 last time against consensus expectations of 38.8. Services, in particular, were hit hard. The region is in a steep economic downturn and a recession is coming. The ECB and governments need to keep up their support.”
FTSE and European stock markets recoup lost ground
The FTSE 100 had a positive start this morning, opening with a gain of 3.6 per cent to reach 5,175 points.
This came despite last night’s announcement from prime minister Boris Johnson that the UK was essentially going into lockdown to combat the spread of coronavirus.
Investors seem to be taking some belated cheer from the Fed declared that its bond-buying programme will be unlimited.
The German DAX climbed by almost 5 per cent in early trading, with the French CAC 40 and Spanish IBEX 35 joining it on a near 4 per cent rise.
Japanese equities rally overnight
The Japanese stock market had a good overnight session, with equities after the US Federal Reserve boosted its stimulus programme.
The Nikkei 225 was up 7.13 per cent – or 1,205 points – to close at 18,092 while the Topix gained 3.18 per cent.
Yesterday saw the Fed announce that its quantitative easing programme will be unlimited in scale (up from its previous pledge to buy $700bn in bonds) in order to tackle the coronavirus crisis.
Asian markets rose in general yesterday, with South Korea’s Kospi up 8.6 per cent, Hong Kong’s Hang Seng rising 4.25 per cent and the Shanghai composite gaining 2.34 per cent.