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(Alliance News) - Oil prices collapsed to more than two-decade lows on Monday as traders grow concerned that storage facilities are reaching their limits, AFP reported.
US crude benchmark West Texas Intermediate briefly plunged almost 20% to below USD15 – its lowest since 1999 – as stockpiles continue to build owing to a crash in demand caused by the COVID-19 pandemic.
Analysts said this month's agreement between top producers to slash output by 10 million barrels a day was having little impact on the oil crisis because of lockdowns and travel restrictions that are keeping billions of people at home.
They said the physical crude market is "awash with oil". WTI was hit particularly hard as its main US storage facilities in Cushing, Oklahoma, were filling up.
AxiCorp's Stephen Innes said: "It hasn't taken long for the market to recognise that the OPEC+ deal will not, in its present form, be enough to balance oil markets."
Brent oil was down by a dollar from late Friday's quote, sitting just above USD27.
However, both Royal Dutch Shell and BP shares started Monday slightly higher, as equities markets were lifted by countries in Europe begining to ease their lockdown restrictions.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 5,796.37
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Hang Seng: marginally lower at 24,368.15
Nikkei 225: closed down 1.2% at 19,669.12
DJIA: closed up 704.81 points, 3.0%, at 24,242.49
S&P 500: closed up 2.7% at 2,874.56
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GBP: flat at USD1.2456 (USD1.2457)
EUR: firm at USD1.0853 (USD1.0838)
Gold: down at USD1,680.56 per ounce (USD1,690.68)
Oil (Brent): down at USD27.26 a barrel (USD28.21)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
1000 CEST EU euro area balance of payments
1100 CEST EU foreign trade
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A GBP1.25 billion package is being launched to help protect the UK's innovation sector during the coronavirus emergency. UK Chancellor of the Exchequer Rishi Sunak said the initiative will include a GBP500 million investment fund for high-growth companies hit by the crisis. The funding will come from both the government and private sector, he said. Small and medium-sized firms specialising in research & development will be eligible for access to GBP750 million of grants and loans.
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Downing Street has hit back at newspaper reports that UK Prime Minister Boris Johnson and his administration dragged their feet in the run-up to the outbreak of the coronavirus pandemic. Number 10 accused the Sunday Times of "falsehoods" and "errors" after the newspaper published a piece in which a Whitehall source claimed the government "missed the boat on testing and PPE", referring to personal protective equipment. The article also claimed the Johnson administration "just watched" as the death toll mounted in Wuhan, China. A government spokesman said: "This article contains a series of falsehoods and errors and actively misrepresents the enormous amount of work which was going on in government at the earliest stages of the coronavirus outbreak."
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UK retail footfall declined at the fastest pace on record in March, numbers on Monday showed, as shoppers were forced to shun high streets and shopping centres due to Covid-19 lockdown measures. Total retail footfall in the UK slumped 45% year-on-year in March, according to the latest British Retail Consortium-ShopperTrak data. "This was, of course, a record decline for the industry that has seen unprecedented challenges during the month," BRC said. February's numbers had shown just a 2.0% annual decline. In the three weeks before the March 23 lockdown, average footfall slipped 18% before collapsing 83% in the fortnight following the curbs being introduced.
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UK house prices fell in April due to the coronavirus, Rightmove said, with not enough properties coming to market during the month. Rightmove said the number of properties coming to the market in April saw a monthly price fall of 0.2% to GBP311,950, with the annual rate of increase from last April being 2.1%. "Given the lockdown and pausing of key activities in the housing market, statistics on the number of properties coming to market, new seller asking prices, and new sales agreed are not meaningful. You do not have a functioning market when buyers can't buy and sellers can't sell, and so the focus needs to be on what is required to help the market recover once the lockdown can safely be eased," Rightmove said.
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The Chinese central bank cut its benchmark interest rate for the second time in 2020, in order to reduce borrowing costs for companies and lift the economy stricken by the coronavirus, Reuters reported. The People's Bank of China lowered the interest rate for its one-year loan prime rate to 3.85% from 4.05% previously, while the five-year LPR was cut to 4.65% from 4.75%. Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages. This is the second time the bank has cut rates, the first being in February with the one-year LPR to 4.05% from 4.15%, and the five-year LPR to 4.75% from 4.8%.
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Germany's producer prices for industrial products decreased in March, pulled down by a fall in energy prices, official statistics agency Destatis said. The produce price index stood at 104.1 in March, down 0.8% from 104.9 both from February and the same month a year before.
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BROKER RATING CHANGES
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HSBC CUTS PRUDENTIAL TO 'HOLD' (BUY) - PRICE TARGET 1150 (1800) PENCE
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HSBC CUTS CENTRICA TO 'REDUCE' ('HOLD') - TARGET 28 (80) PENCE
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RBC CUTS DIAGEO TO 'SECTOR PERFORM' (OUTPERFORM) - PRICE TARGET 2400 (3000) PENCE
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COMPANIES - FTSE 250
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Aston Martin Lagonda said it received acceptances for 98% of its 4-for-1 rights issue as the embattled luxury carmaker seeks to bolster its finances. Back in January, Aston Martin had announced a GBP500 million funding plan, which included an investment by Formula 1 team Racing Point owner Stroll, as the Canadain billionaire takes over as Aston Martin's chair on Monday. Mercedes Formula 1 team principal Toto Wolff bought a stake of 0.95% via investment vehicle ErsteAM, after the rights issue. Upon taking the chairmanship at Aston Martin, Stroll said the company's most "pressing objective" is to plan to restart manufacturing operations, particularly to start production of the brand's first sports utility vehicle, the DBX. Stroll said that, alongside the return to production, Aston Martin will be undertaking a rebalancing of supply to demand for its core models. In the months ahead, as the world starts to emerge from the Covid-19 pandemic, Stroll said, Aston Martin will start to ramp-up marketing initiatives to continue to build its order book.
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Redrow said it has secured an extra GBP100 million additional funding under its existing revolving credit facility. The housebuilder noted it now has GBP350 million of committed facilities under the RCF which matures at the end of December 2022.
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Plus500 said Chief Executive Asaf Elimelech has decided to step down from his role with immediate effect. The company named Chief Operating Officer David Zruia as interim CEO. Elimelech will serve a 12-month notice period and will work in a transitional role alongside Zruia until a permanent replacement is appointed, Plus500 added.
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COMPANIES - OTHER MAIN MARKET AND AIM
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South32 reported production falls in its third quarter, a period hurt by the Covid-19 pandemic, but said its year-to-date output numbers are "strong". In the quarter ended March 31, alumina production, or aluminium oxide, slipped 4.0% quarter-on-quarter to 1.3 million tonnes. Energy coal production was down 0.8% to 5.9 million tonnes, while metallurgical coal output slipped 3.4% to 1.2 million tonnes from the second quarter. Elsewhere, the Perth, Australia-based miner reported a 6.5% quarter-on-quarter drop in manganese ore production to 1.3 wet metric tonnes. Payable silver output was down 24% to 2.4 million ounces.
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COMPANIES - INTERNATIONAL
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Australia will force Google and Facebook to pay media outlets for their content, the government announced, vowing to lead the world in making the tech giants share lucrative advertising revenue with traditional media. Treasurer Josh Frydenberg said a mandatory code of conduct – to be fully unveiled by July and made law soon after – will require the US-based firms to reimburse Australian media companies for using their news and other content. Google, part of Alphabet, and Facebook Inc have had a huge impact on Australia's news industry, capturing two-thirds of online advertising spending. In response to falling revenues, Australian news outlets have slashed 20% of jobs in the last six years.
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Dutch industrial conglomerate Royal Philips said profit fell sharply in the first quarter on higher costs, despite a marginal rise in sales. For the three months to the end of March, pretax profit fell by 91% to EUR21 million from EUR245 million, despite sales growing by 0.2% at EUR4.16 billion from EUR4.15 billion. On a comparable basis, revenue was down 2%. Royal Philips's profit performance was hurt by a rise in expenses, including administrative, selling and research & development. "The start of 2020 was marked by the Covid-19 outbreak, and we have mobilized our resources since January to address this unprecedented challenge. At Philips, we are focused on our triple duty of care: meeting critical customer needs, safeguarding the health and safety of our employees, and ensuring business continuity," said Chief Executive Officer Frans van Houten.
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Monday's Shareholder Meetings
MetalNRG
SThree
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By Tom Waite; thomaslwaite@alliancenews.com
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