(Alliance News) - Stock prices in London are expected to continue Thursday's slide on Friday, after fear of a second wave of Covid-19 cases following a spike in the US sent Wall Street tumbling overnight.
Meanwhile, the UK economy shrank by a fifth in the month of April, according to the latest figures from the Office for National Statistics early Friday.
Gross domestic product slumped 20% month-on-month in April, the biggest monthly fall since the series began - far steeper than the falls of 5.8% and 0.2% seen in March and February respectively. In the three months to April, the economy contracted an "unpredecented" 10% on a sequential basis.
In early UK company news, Informa said it is relishing the opportunity to begin exhibitions in China again, while Bakkavor is happy with its trading up to May, and Hipgnosis Songs Fund is considering an equity raise.
IG says futures indicate the FTSE 100 index of large-caps to open 19.40 points lower at 6,057.30 on Friday. The blue-chip index closed down 252.43 points, or 4.0%, at 6,076.70 on Thursday.
"Yesterday was like a flashback to the madness that was seen in markets in February and March, as fears about a possible second wave of Covid-19 prompted intense selling. The sharp declines that were registered yesterday must be put in context with the major gains that have been racked up in recent weeks," CMC Markets Analyst David Madden said.
He continued: "There is an argument to be made that equities were due a decent correction in light of the gains made in the past three months. On the other hand, economies can't stay locked down forever so a jump in the infection rate is going to be the cost of trying to get things back to normal. Policy makers will have difficult a task ahead of them as they try to balance the health and economic risks."
New York stocks suffered heavy losses on Thursday after another spike in US jobless claims, amid worries over rising coronavirus cases in some states that have reopened their economies. The Dow Jones Industrial Average dropped 1,861.82 points, or 6.9%, its worst day since March. The broader S&P 500 lost 5.9%, and the tech-heavy Nasdaq Composite fell 5.3%.
Selling carried on into Asia on Friday, with the Japanese Nikkei 225 index closing down 0.8%. In China, the Shanghai Composite is down 0.2%, while the Hang Seng index in Hong Kong is down 1.2%.
US initial jobless claims continue to trend downwards as states start to re-open, data from the Department of Labor showed on Thursday, though they still remain around historic levels. For the week to June 6, seasonally-adjusted initial claims came in at 1.54 million, down from 1.90 million the week before.
The figures continue to be elevated by historical standards due to the Covid-19 pandemic, but have declined gradually since a record weekly high of 6.9 million claims was set in late March.
Around 21 US states are reporting a rise in new Covid-19 cases which comes as health experts warned that premature reopening of states could lead to a surge in cases.
The spike prompted Arizona - which has seen a huge increase since its reopening - to ask its hospitals to activate coronavirus emergency plans. Other new Covid-19 hotspots include Texas, Florida, North Carolina, South Carolina, Oregon, Tennessee, Washington, New Mexico, Missouri, and Utah.
In London, business publisher and events organiser Informa said its Subscriptions unit - which makes up 35% of revenue - continues to perform "resiliently" but its Events unit - 65% of revenue - is focusing on providing alternative digital services.
Informa noted the Events unit is focusing on "long-term relationships ahead of short-term revenue", but added the return of events in China is now "real" possibility.
"We expect the pace and shape of recovery to be gradual and phased by market. Despite continued near-term unpredictability, our strengthened balance sheet, continuing cost controls and strong liquidity is enabling us to focus on the other side of Covid-19," Chief Executive Stephen Carter said.
Sandwich maker Bakkavor said its China operations suffered towards the end of January following the coronavirus outbreak, which then resulted in a "sharp reduction" in the UK and US in sales volumes in the last week of March and into April.
Bakkavor added: "Since that time, sales volumes in all three regions have stabilised and are showing early signs of recovery, with group like-for-like revenue for the five months to the end of May down around 5% compared to the same period last year."
The company noted it continues to operate with significant headroom against available lending facilities of GBP562.5 million - so has not required any government supported debt funding.
Hipgnosis Songs Fund said it is contemplating an equity raise to help support its GBP1 billion acquisition pipeline.
The song and musical intellectual property rights investor said it "continues to see attractive pricing on Catalogues of the finest quality" and is in active discussions to acquire over GBP1 billion of music rights.
"The company is exploring the most appropriate way of funding further investments, with a view to delivering further value for its shareholders, including the use of borrowings as described in the company's amended borrowing policy, or an equity fundraise," Hipgnosis added.
Pub manager Mitchells & Butlers said it has agreed "a number of new arrangements" with its main creditors, in order to "meet the challenge" of the coronavirus pandemic.
The full impact of the pandemic, Mitchells & Butlers said, is still uncertain due to still not knowing when it can reopen its pubs and restaurants.
As a result, Mitchells & Butlers has agreed to a committed unsecured liquidity facilities totalling GBP250 million through to December 31, 2021.
This involves extending to the term of its existing GBP150 million facilities plus the provision of additional facilities totalling GBP100 million.
"These facilities will be on a new covenant structure, reflecting the revised trading profile of the group through the recovery of its business following re-opening, and continue to be supported by a negative pledge in respect of the group's unsecured assets," Mitchells & Butlers said.
The GBP100 million additional facilities are structured under the UK government-backed Coronavirus Large Business Interruption Loan Scheme.
Mitchells & Butlers currently has cash balances of GBP130 million, having fully drawn down the existing facilities of GBP150 million.
During this closed period, the Ebitda loss in a four-week period is about GBP15 million, including rent, Mitchells & Butlers said.
Cash burn before debt service is higher than this, the company noted, primarily as it pays down supplier balances, at between GBP30 million and GBP35 million per four-week period.
Biffa said it has placed 50.0 million shares at 200 pence each, raising GBP100 million. The placing price is a 5% discount to its closing price of 210.5p in London on Thursday.
Biffa said the proceeds will put the balance sheet in a position of strength, providing the flexibility to continue to pursue "highly attractive identified organic and inorganic growth opportunities in line with its strategy".
Last week, Biffa decided against making a final payout to save cash amid "unprecedented challenges" arising from the Covid-19 pandemic.
Cruise line operator Carnival said its Holland America Line is extending its pause of cruise operations in Canada and Hawaii into early 2021.
Carnival is cancelling additional departures from the port of Vancouver, British Columbia, Canada, in the autumn of 2020, as well as select Hawaii itineraries for early 2021.
Sterling was quoted at USD1.2582 early Friday, down from USD1.2642 at the London equities close on Thursday. The euro traded at USD1.1303, down versus USD1.1377 late Thursday.
The UK and the EU are due to take stock of progress in their thorny trade negotiations at high-level talks on Monday, after several negotiating rounds have delivered little progress to date.
Time is ticking towards an end-of-year deadline when EU rules will stop applying to the UK, following its departure from the bloc on January 31.
Without a follow-on arrangement, costly trade barriers will spring up overnight, along with other administrative hurdles. Monday's talks - via video conference - will be attended by British Prime Minister Boris Johnson, European Council President Charles Michel, European Commission President Ursula von der Leyen and European Parliament President David Sassoli.
The meeting was confirmed by spokespeople in London and Brussels.
Besides assessing the state of negotiations on a new trade and political relationship, the two sides are also due to discuss the option of extending Britain's transition period beyond December 31 - a move that London has already ruled out.
Against the yen, the dollar was quoted at JPY107.14, up from JPY106.64.
Gold was priced at USD1,728.60 an ounce early Friday, lower than USD1,742.15 on Thursday.
ThinkMarkets Analyst Fawad Razaqzada commented: "When stocks fall viciously, occasionally gold goes lower as well because of liquidation, whereby investors trading on margin are forced close out their (profitable) long gold positions to free up margin for their (losing) long equity holdings. Other times, gold can struggle during periods of market turmoil because of a big rally for the dollar. This time it may have been a combination of these factors."
Brent oil was trading at USD37.69 a barrel, down from USD38.70 late Thursday.
The economic calendar on Friday has France inflation readings at 0745 BST and US import and export prices at 1330 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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