25 February 2020 • 2:27pm
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Dow Jones Industrial Average
- Europe sell-off continues as coronavirus fears persist
- Market rout wipes $139bn from world’s 500 wealthiest people
- SIG plunges on “highly unexpected” executive departures
- Meggitt CEO “cautious but surprisingly upbeat” about virus
- Tesco to cut 1,800 jobs
- Matthew Lynn: Markets must wake up to Bernie Sanders’ bid for Oval Office
Breaking: Tesco to cut more than 1,800 jobs
Tesco has announced it will cut more than 1,800 jobs as part of changes to its in-store bakeries.
Afternoon market update
We are less than 20 minutes from the US open and here is how markets are looking:
Europe remains a sea of red as the coronavirus continues to weigh on equities. Austria confirmed its first two cases of the disease, while a hotel in Tenerife was put on lockdown after an Italian guest tested positive for the virus.
However, things are looking a bit brighter on the other side of the pond with US futures pointing higher.
Tesco exits China with £275m stake sale
Tesco is poised to exit China for good after it offloaded a remaining £275m stake in an ‘overlooked’ part of the business abroad.
My colleague Laura Onita reports:
It sold a 20pc chunk of Gain Land, a joint venture it set up in 2014 specifically to help it retreat from the market, to its partner China Resources Holding.
The grocer took a major step back six years ago when it realised that its ambitious plans to do business in China was in fact not worth pursuing.
The cash it will get in return will go towards “general corporate purposes”, the company said on Tuesday.
The move represents “another step in the geographic retrenchment”, said Clive Black at broker Shore Capital, while it focuses on being more disciplined with its money rather than growth.
Luxury sales could drop by $44bn from virus outbreak
More bad news for Bernard Arnault today.
Luxury-goods stocks from LVMH to Swatch look set for a rough ride this year after a survey showed industry executives expect a severe fallout from China’s coronavirus.
The impact of the outbreak is likely to reduce industry sales by as much as €40bn (£33.4bn) in 2020, according to the survey of 28 top executives undertaken by Boston Consulting Group and Sanford C. Bernstein.
Investors should brace for “a gap year” for the sector, Bernstein analyst Luca Solca wrote in a note.
In case you missed it…
The regional divide is to widen as London and the south outpace northern economies again.
My colleague Tim Wallace reports:
Boris Johnson’s plan to ‘level up’ the UK and its regions faces serious challenges, with the richer economies of London and the south east set to grow significantly faster than northern areas.
Towns in the north east, Yorkshire and the Humber, and the West Midlands are expected to be the slowest-growing areas over the next three years, according to economists at EY.
By contrast their counterparts in the south east and the east of England will grow almost twice as quickly.
As a result London and the surrounding regions will extend their lead over the rest of the country, highlighting the difficulty of closing the prosperity gap.
Hammerson halves dividend to pay down debt
Shopping centre owner Hammerson has slashed its dividend in a bid to shore up its finances after the value of its properties fell by 16pc.
My colleague Rachel Millard reports:
The value of its portfolio, which includes the Bullring centre in Birmingham, dropped to £8.3bn during a year in which retailers were hammered by competition from online shopping, business rates and employment costs.
Thirty-three of Hammerson’s retail tenants either went into administration or restructuring during 2019.
Chief executive David Atkins said the fall in valuations had further to run and they were taking a hefty cut to the dividend now to avoid “chipping away” at it in months to come.
HSBC set to close 27 UK branches
Nearly 50 jobs are at risk at HSBC branches across the country, as the bank revealed plans to close 27 sites this year.
Staff in 10 branches, which employ 46 people between them, could face losing their jobs under the closures.
However, those working at the other 17 branches earmarked to shut will be moved to other roles at nearby HSBC sites, the bank told the PA news agency.
City watchdog admits major data breach
The records of 1,600 people who complained to the City watchdog have been exposed following a major data breach at the regulator.
My colleague Adam Williams reports:
The Financial Conduct Authority (FCA) mistakenly published the personal records of complainants on its website, where anyone could access the information.
The data was visible between November 2019 and February 2020 and included the records of people who made a complaint between January 2018 and July 2019.
This leaked information included the name of the complainant, the company they represent, the status of the complaint and other information. In some instances addresses and telephone numbers were also visible.
Telegraph Money can disclose that the list contained the names of several high-profile individuals.
It is understood that those who had significant personal details exposed – around half of the people on the list – will be contacted directly by the regulator. The FCA has apologised to all those affected.
Trump: Markets will crash if I lose
Moving away from virus fears for a moment, Donald Trump has been addressing CEOs in India…
The US president has claimed stock markets will crash if he loses in November but reach new highs if he is re-elected. US stocks have risen 40pc since Trump won in 2016.
Addressing session with CEOs from India Inc @POTUS says ‘If I win the markets (in US) will jump thousands & thousands of points, if not the markets will crash. I feel we are going to win the elections. Democrats out of control’ @CNBCTV18Live @CNBCTV18News #Trump
— Shereen Bhan (@ShereenBhan) February 25, 2020
Read Matthew Lynn’s piece here about how markets must wake up to Bernie Sanders’ bid for presidency.
Governments should avoid travel bans, says World Travel and Tourism Council
The London-based World Travel and Tourism Council (WTTC), has called for governments and authorities to avoid blanket travel bans and other “extreme” measures in an attempt to stop the spread of the coronavirus.
Airline and travel stocks have been among the worst hit over the last two days amid fears there could be a travel crackdown on the continent after Italy emerged as the biggest coronavirus hotspot outside Asia.
Chinese economy ‘unlikely to return to full-capacity before third-quarter’
The Chinese economy is unlikely to return to full-capacity before the third-quarter, according to Neil MacKinnon, global macro strategist at VTB Capital.
Mr MacKinnon said:
The fact of the matter is that the virus has spread outside of China and is present in the major economies. China is still in lockdown and the economy is 50pc operative, according to estimates from Bloomberg.
Once travel restrictions inside China are lifted there is a risk of the virus increasing again and/or a reluctance of people to return to work. This looks like more of an ‘L-shaped recovery’ as far as the Chinese economy is concerned and full-capacity working is unlikely to happen before the third quarter.
The ramifications are certainly global, given that China has accounted for a third of global GDP growth over the past decade. The disruption to global supply chains and disruption to trade and investment flows is considerable.”
Europe is now comfortably in the red as investors continue to move out of equities and into safer assets.
Gold has started to edge higher after an earlier decline.
Market rout wipes $139bn from world’s 500 wealthiest people
Ouch. The world’s 500 richest people lost a combined $139bn (£107bn) on Monday as markets tanked amid coronavirus fears.
Bernard Arnault, chairman of luxury-goods maker LVMH, and Amazon founder Jeff Bezos led the declines, each losing more than $4.8bn, according to Bloomberg data.
It was the biggest wealth drop for the group since the Bloomberg Billionaires Index began tracking that figure in October 2016.
M&G property fund to cut retail holdings
M&G’s frozen flagship UK property fund is to cut its retail holdings to 32pc from 38pc as it raises cash to meet potential redemption requests.
Retail accounts for 80pc of assets the fund has sold or is “on course to exchange”.
Tony Brown, global head of M&G Real Estate, said the market is “more liquid” than last year.
US futures giving back earlier gains…
- Dow Jones +0.34pc
- S&P 500 +0.37pc
Boohoo must improve environmental credentials, says Citi
Online retailer Boohoo needs to improve its environmental and social credentials to avoid becoming a “poster child for a potential consumer backlash against fast fashion”, according to a Citi analyst.
Adam Cochrane said that while the company has been an “incredible success story”, the main risks for the stock include whether Boohoo can improve its sustainability track record.
Europe turns lower
The rally was short-lived. All major European indexes have now reversed earlier gains and are trading in the red, driven by a decline in carmakers and banks.
- FTSE 100 -0.2pc
- Stoxx 50 -0.13pc
- DAX -0.04pc
- CAC 40 -0.1pc
European stocks turn lower https://t.co/MYv6dWcOy2 pic.twitter.com/oafYHwhGbE
— Bloomberg Markets (@markets) February 25, 2020
Meggitt CEO sees no material impact to supply chain from virus
Tony Wood, the chief executive of UK aerospace manufacturer, has said he is “cautious but surprisingly upbeat” about the coronavirus.
The company has 375 employees in China and, as of last week, 80pc were back at work.
“Most of the disruption has been on the logistics side, getting parts onto planes and out of the country into build lines around the world,” said Mr Wood.
It came as the company warned of hit to growth from the halt in production of Boeing 737 MAX. Sir Nigel Rudd, Meggitt’s chairman, is also stepping down.
Shares fell 3.8pc to 571.6p.
SIG plunges on “highly unexpected” executive departures
Shares in building materials maker SIG have plunged 11.7pc, making it the biggest faller on the FTSE 250, after the sudden departure of the company’s CEO and CFO.
SIG has appointed former Patisserie Valerie chief Steve Francis on an initial contract until the end of the year.
Priyal Woolf, an analyst at Jefferies, said the resignations were “highly unexpected”.
She added that the departures mark the “end of the road for yet another management team unable to turn SIG around after coming in with high expectations”.
Prudential leads FTSE 100 after targeted by activist investor
Prudential is leading the FTSE 100 after an aggressive New York hedge fund built a near-5pc stake in the insurer and demanded a separation of its US and Asian businesses
Shares in the insurer have jumped 2.6pc to £14.58 in early trading.
My colleague Michael O’Dwyer reports:
Third Point is calling for the British blue-chip to split its US life insurance business Jackson from its high-growth Asian operations, arguing Prudential is heavily undervalued because the two arms are tied together.
The hedge fund’s billionaire founder Daniel Loeb – whose previous successes include ousting the boss of Yahoo! – also took aim at the firm’s London listing in a letter to its board on Monday.
Mr Loeb said management should “identify listing venues where the standalone businesses will receive the attention they deserve, and which provide the optimal shareholder base to support necessary reinvestment and the future growth strategy of each company”.
European shares open higher
Markets are looking a bit different this morning. European equity indexes have opened in the green, paring some of Monday’s massive losses, despite growing fears that Japan is on the verge of a rapid expansion of coronavirus cases.
What happened overnight?
Japanese shares tumbled more than 3pc as traders returned after a holiday, though the decline was less than the two-session slide on Wall Street while they were away.
Stocks slipped in China and Australia and pushed higher in South Korea and Hong Kong. Ten-year Treasury yields rose from near record lows and crude oil pared some of its near-4pc drop on Monday.
A surge in cases in South Korea and Italy, along with the disease’s spread in Japan, spooked investors Monday, but the World Health Organization has held off from calling a global pandemic.
Some may also be taking encouragement from news about the development of treatments or a vaccine, even if experts warn about the time it would take to build significant stocks of medicines.
Fujifilm jumped as much as 8.8pc on Japanese plans to recommend its Avigan drug as a treatment.
Agenda: Europe pointing higher at the open
Europe is set to open higher after it recorded its worst day in more than three years on Monday.
The number of confirmed coronavirus cases worldwide jumped above 80,000 overnight as deaths rose to 2,700.
An expert panel also warned that Japan is on the brink of a rapid expansion in its number of cases. It came as virus hot spots emerged in Italy, Iran and South Korea, triggering the market selloff.
Clothing giants could be hit hard
Workers at a garment factory near Hanoi
Clothing giants such as Nike and Adidas could be hit by the impact of the coronavirus on Vietnam’s garment industry.
Nike, Adidas, Patagonia, North Face, H&M, Uniqlo and Gap all manufacture clothes in Vietnam where supply chains could be harmed given that more than 50pc of the country’s clothing materials are imported from China.
Vietnamese garment makers will face a severe shortage of materials in the second quarter, Vu Duc Giang, the chairman of the Vietnam Textile and Apparel Association, said on Tuesday.
“Domestic firms have sufficient materials for production until the end of the first quarter, but many of them will face severe shortage of materials from the second quarter because they have trouble importing materials from key suppliers in China, Japan and South Korea,” Mr Giang said.
Garments and textiles are Vietnam’s third-largest export earner, after smartphones and electronics.
Work from home or stagger shifts, Japan tells workers
The Japanese government on Tuesday urged companies to recommend working from home and staggered shifts for workers in a bid to curb the spread of the new coronavirus.
The plan, approved at a cabinet meeting on Tuesday, also urged people with symptoms of cold or fever to stay at home and asked event organisers to carefully consider whether to proceed with their plans.
Authorities hope that working online or from home would reduce the infection risk driven by contact.
Hong Kong down at the break
Stocks in Hong Kong edged down Tuesday morning on concerns about the impact of the coronavirus on the global economy, though losses were tempered by bargain-buying following a three-day retreat.
The Hang Seng Index dropped 0.08 percent, or 21.74 points, to 26,799.14 by the break.
Bargain-buying helps Asian markets to recover
Bargain-buying helped to claw back some of the losses in Asian markets on Tuesday morning but the damage from coronavirus fears looks set to continue today.
Tokyo led losses as markets reopened to play catch-up with Monday’s global sell-off.
The Nikkei ended the morning three per cent lower, while Sydney and Wellington each shed 1.3 per cent and Shanghai lost 0.9 per cent.
Taipei and Jakarta were also lower. However, Hong Kong rose 0.2 per cent and Seoul added 0.6 per cent having plunged almost four per cent Monday in reaction to a spurt of infections in South Korea at the weekend.
US government asks Congress for $2.5bn to fight virus
Wall Street stocks finished with heavy losses on Monday
Donald Trump is asking Congress for $2.5 billion to fight the coronavirus, including more than $1 billion for vaccines, the White House has said on Monday.
“The Trump administration continues to take the spread of the COVID-19 Coronavirus Disease very seriously,” a spokeswoman for the White House Office of Management and Budget said. “The administration is transmitting to Congress a $2.5 billion supplemental funding plan to accelerate vaccine development, support preparedness and response activities and to procure much needed equipment and supplies,”
The money will be also used for therapeutics and the stockpiling of personal protective equipment such as masks, the White House said.
Analysis: Can the markets bounce back?
The collapse in global markets on Monday will be rectified by a speedy return to form, the IMF has insisted, but Russell Lynch doubts their confidence in a “rapid, V-shaped” recovery:
“The coronavirus landed almost exactly at the point when growth, at its lowest ebb for a decade last year, was thought to have bottomed out… Before long the Bank of England and other central banks could be dealing with a “stagflation” headache of rising prices and subdued demand, but weak productivity may prevent monetary stimulus.”
: Stock market selloff is just the start of Europe’s problems if coronavirus takes hold
Hong Kong stocks down
Hong Kong stocks fell slightly at the start of trade on Tuesday morning, a fourth consecutive day of losses.
The Hang Seng Index edged down 0.37 per cent, or 98.49 points, to 26,722.39.
The benchmark Shanghai Composite Index fell 1.62 per cent, or 49.16 points, to 2,982.07 and the Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 2.09 per cent, or 40.35 points, to 1,893.01. Analysts said that some losses were tempered by bargain-buying.
Asian shares follow US rout
Tokyo stocks dropped more than 3.5 percent at the open on Tuesday, tracking falls on global markets as fears mounted that the new coronavirus outbreak will derail economic growth.
The benchmark Nikkei 225 index sank 3.58 percent or 836.57 points to 22,550.17 in early trade, while the broader Topix index was down 3.53 percent or 59.07 points at 1,614.93.
In Australia, the share market slumped 2.3 per cent at the open.
Good morning. On Monday European shares suffered their sharpest drop since directly after the Brexit vote with the FTSE 100 plunging 3.3pc, its worst one-day fall for four and a half years. Around £76bn was wiped off the value of companies across London’s main market.
Across the pond, Wall Street stocks joined the global rout and finished with steep losses as worries mounted that the new coronavirus will derail economic growth.
5 things to start your day
1) Boris Johnson’s plan to ‘level up’ the UK and its regions faces serious challenges, with the richer economies of London and the south east set to grow significantly faster than northern areas. Towns in the north east, Yorkshire and the Humber, and the West Midlands are expected to be the slowest-growing areas over the next three years.
2) Coronavirus spells trouble for tourism from Bangkok to Bicester: Bicester Village’s streets of wood-panelled designer stores and red letter boxes have looked more like a ghost town since the coronavirus triggered a plunge in Chinese visitors.
3) Goldman Sachs and EY quarantining staff returning from China: Goldman is one of several banks and professional services companies understood to have told staff to “self-isolate” and work from home for up to 14 days after returning from the worst-affected regions, including China and Hong Kong.
4) An aggressive New York hedge fund has demanded the break-up of Prudential after building a near-5pc stake in the insurer. Third Point is calling for the British blue-chip to split its US life insurance business Jackson from its high-growth Asian operations, arguing Prudential is heavily undervalued because the two arms are tied together.
5) Uber to pay drivers to install rooftop billboards on their cars: In its first move into the advertising industry, the app-based taxi company has signed a deal with Las Vegas firm Adomni to place the adverts in three US cities.
Coming up today
Analysts at Goodbody say a sell-off at shopping centre-owner Hammerson looks “overdone”, adding the FTSE 250 group’s disposal strategy – which included the sale of a further seven retail parks for £400m on Friday, its biggest sale in a decade – was proceeding as planned, and some of its assets are being underestimated.
Interim results: Clinigen, Hotel Chocolat, Manchester United
Full-year: Derwent London
Preliminary: Croda, Hammerson, Meggitt, Morgan Advanced Materials, Petrofac
Economics: CBI distributive trades (UK), final GDP reading (Germany), consumer confidence (US)
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