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(Alliance News) - Stock prices in London are seen opening sharply higher on Tuesday, following a strong performance in Asian equity markets, buoyed by the US central bank's stimulus measures on Monday.
UK Prime Minister Boris Johnson late Monday placed the UK on lockdown to tackle the coronavirus, threatening police fines for anyone who ignores new measures - including a ban on public gatherings of more than two people.
All public gatherings of more than two people - other than those they live with - will be barred, the PM said. Other premises being shuttered include libraries, playgrounds, outdoor gyms and places of worship.
In early UK company news, home furnishings retailer Dunelm Group and housebuilder Redrow cancelled their respective interim dividends in light of the coronavirus outbreak. Anglo-Australian miner Rio Tinto said it would scale back some of its operations, and sandwich maker Greencore Group appointed a new finance head.
IG futures indicate the FTSE 100 index is to open 211.51 points, or 4.2%, higher at 5,205.40. The blue-chip index closed down 196.89 points, or 3.8%, at 4,993.89 on Monday.
The Japanese Nikkei 225 index closed up 7.1% on Tuesday. In China, the Shanghai Composite ended up 2.3%, while the Hang Seng index in Hong Kong is up 4.6%.
Dunelm Group said it has closed its stores to customers in response to the UK government's declaration of a nationwide lockdown.
The retailer said for the first ten weeks of the third quarter to March 7, total like-for-like sales were up 6.5%. Over the ten weeks, like-for-like store sales were up 2.4% and Dunelm.com was up 32%. Total sales growth, including the benefit of new store openings, was 7.9%.
However, Dunelm said that over the past two weeks, it has seen a "progressively negative impact" on trading as a result of the pandemic, with total LFL sales down 8.8% - driven by reduced footfall in physical stores.
Following UK government's lockdown announcement late Monday, Dunelm said it intends to temporarily close all of its customer facing operations from Tuesday, including Click & Collect.
"At the same time, we have also taken actions to protect the cash resources of the business. This includes our decision to cancel the interim dividend, which was due to be paid in April. Our capital policy is unchanged and we remain committed to returning surplus cash to our shareholders. In light of the extraordinary circumstances, the board believes it is important to retain the cash in the business until further certainty is gained," Dunelm said.
Echoing other UK listings, Dunelm said it does not think it is appropriate to give financial guidance for financial 2020 and beyond.
Redrow cancelled its interim dividend of 10.05 pence as part of measures taken to manage the risks to stakeholders.
The housebuilder said trading has remained resilient in the first 12 weeks of the second half to March 20, with the value of net reservations up GBP121 million at GBP525 million compared to last year. The order book stood at GBP1.4 billion.
Redrow said it has a strong balance sheet together with GBP250 million of committed facilities and is "working proactively" to protect cash flow. Net debt currently stands at GBP116 million, and the company expects this to fall over the coming month as a high volume of homes legally complete.
"Once we have more certainty over the impact on the industry and our businessn we will make an announcement over future dividend distributions together with an update on trading," Redrow said.
Rio Tinto said it "will slow down" some of its operations due to the Covid-19 outbreak.
At the Richards Bay Minerals site in South Africa, Rio will curtail production in compliance with a directive from the South African government, which has imposed a lockdown similar to the one in the UK, though only from Thursday. As a result, all mining operations at RBM will be halted by midnight on Thursday for 21 days, the miner noted.
Rio noted an announcement by the government of Quebec, Canada for the closure of all non-essential businesses from midnight Tuesday to April 13.
"We will work with the government to comply with its directive in relation to our Quebec operations. Any impacts to operations or production guidance will be reported to the market in due course." the company said.
Greencore Group appointed Emma Hynes as its new chief financial officer to replace the outgoing Eoin Tonge. Hynes will assume the role on May 19 and was previously CFO of Press Up Entertainment Group.
Asian markets surged after the US Federal Reserve on Monday unveiled an unprecedented bond-buying programme to support the economy.
The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small-and medium-sized firms hurt by a lockdown across the country.
AxiCorp's Stephen Innes said Asia was waking up to "the most significant monetary experiment in the history of financial markets".
"Asian investors like what they see from an all-in Fed, which is being viewed in a very impressive light for both Main and Wall Street, even as the US congress dithers," he added.
Wall Street was less impressed by the Fed move, announced before the start of trading in New York on Monday. The Dow Jones Industrial Average closed down 3.0%, S&P 500 down 2.9% and Nasdaq Composite down 0.3%.
However, on Tuesday, US stock futures were pointed sharply higher.
"Two failed attempts by US policymakers to pass a stimulus bill is sowing concern that US politicians simply don't get it when it comes to the people they claim to represent, and saw US markets close lower, though they did finish off their lows, in a sign that a deal may well come, it may just take a little longer, raising hopes we are seeing a degree of stabilisation," commented CMC Markets analyst Michael Hewson.
"This stabilisation does appear to be manifesting itself in the way of a calmer session and a more optimistic tone in Asia markets, on the back of hopes that more fiscal measures are forthcoming, and this in turn is set to filter through into a positive start for markets here in Europe."
The pound was quoted at USD1.1635 Tuesday morning, up from USD1.1471 at the London close Monday.
The euro was quoted at USD1.0781, higher than USD1.0741 late Monday. Against the yen, the dollar was trading at JPY110.40, down from JPY111.47.
Brent oil was quoted at USD28.16 a barrel Tuesday morning, up from USD25.30 late Monday. Gold was priced at USD1,561.90 an ounce, up from USD1,543.08.
The economic events calendar Tuesday has PMI readings from Germany, eurozone, UK and US at 0830 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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