(Alliance News) - The Bank of England and UK Treasury on Thursday said they have agreed to temporarily extend the use of the government's Ways & Means facility.
The facility is the government's overdraft account with the BoE, enabling cash advances from the UK central bank to the government.
"As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19," the BoE said.
When the Debt Management Office took on the government's cash management in 2000, the need for daily use of the facility eased. However, it has remained available and has been used "on a number of occasions" since 2000. The previous high for use of the W&M account was just under GBP20 billion in 2008.
The government will continue to use the markets as a primary source of financing, and any use of the facility will be "temporary" and "short-term", the BoE stressed.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 1.6% at 5,769.59
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Hang Seng: up 1.2% at 24,247.75
Nikkei 225: closed marginally lower at 19,345.77
DJIA: closed up 779.71 points, 3.4%, at 23,433.57
S&P 500: closed up 3.4% at 2,749.98
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GBP: flat at USD1.2385 (USD1.2390)
EUR: soft at USD1.0856 (USD1.0869)
Gold: up at USD1,653.48 per ounce (USD1,650.50)
Oil (Brent): up at USD33.42 a barrel (USD31.56)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1100 BST Ireland consumer price index
1230 BST UK NIESR monthly GDP tracker
1000 CEST EU eurozone economic outlook
0830 EDT US producer price index
0830 EDT US initial jobless claims
1030 EDT US EIA weekly natural gas storage report
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UK government ministers have raised the prospect of Britain's coronavirus lockdown extending beyond three weeks, as Boris Johnson spent a third night in intensive care. Foreign Secretary Dominic Raab, who is deputising for the prime minister, will chair a Cobra emergency committee on Thursday afternoon to discuss the lockdown measures with leaders of the devolved nations. No decision is expected to be made at that meeting in Johnson's absence, with key figures in the response instead discussing how it will be resolved next week. With Wednesday seeing a rise of 938 in the number of deaths in hospitals of patients who tested positive for Covid-19, the highest new total so far, and Johnson still in hospital, there seems little chance of the lockdown being lifted. However the restrictions face their toughest test so far over the Easter weekend, with temperatures set to reach 25C in some parts of the country, which could tempt more people to break the stay at home rules.
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The UK economy contracted in February even before the Covid-19 situation intensified in Europe, data from the Office for National Statistics showed. For the month of February, gross domestic product fell by 0.1% month-on-month, missing expectations and reversing a 0.1% rise in January. Consensus had seen February's growth rate matching that of January. "Today's figures show that in the three months to February, which was before the full effects of coronavirus took hold, the economy continued to show little to no growth," said Rob Kent-Smith. head of GDP at the ONS. "Most elements of the services sector grew, though manufacturing continued to decline. Construction saw a notable fall in February, as wet weather and flooding hampered housebuilding," he added.
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The uncertainty around the global coronavirus pandemic's duration and severity creates "major downside risks" to the US economy, the Federal Reserve said. The US is sure to take a hit in the near term as businesses are forced to close and consumers are confined to their homes, the Fed said in the minutes of the March 15 emergency policy meeting, when the central bank slashed the benchmark interest rate to zero. But while the shutdowns imposed to contain the virus create hardship for businesses and households, they should not have the lasting impact that was seen in the wake of the global financial crisis in 2008, Fed officials said.
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BROKER RATING CHANGES
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BERENBERG CUTS ASSURA TO 'HOLD' ('BUY') - TARGET 75 PENCE
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BARCLAYS RAISES JUPITER FUND MANAGEMENT TO 'EQUAL WEIGHT' ('UNDERWEIGHT') TARGET 200 (335) PENCE
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RBC RAISES WILLIAM HILL TO 'OUTPERFORM' ('SECTOR PERFORM') - TARGET 135 (220) PENCE
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COMPANIES - FTSE 100
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Diageo said the widespread closure of bars and restaurants due to Covid-19 is having a "significant impact" on its performance. In mainland China, Diageo said it is beginning to see "a very slow return" of on-trade consumption. In Europe and North America, there has been some pick-up in retail stores amid the closure of bars, but it is "unclear whether this will be sustained". The Smirnoff vodka distiller and Guinness beer brewer stressed that it has a strong balance sheet, and added that it will not initiate the next phase of its three-year buyback programme during the remainder of 2020. "Given the global nature of the Covid-19 pandemic, and the uncertainty around the severity and duration of the impact across multiple markets, we are not in a position to accurately assess the impact of this on our future financial performance. We are therefore withdrawing our guidance on group organic net sales growth and organic operating profit growth for fiscal 2020," said Diageo.
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Packaging firm Mondi said it delivered a "robust" performance in the first quarter of 2020. Underlying Ebitda of EUR385 million was 18% below a year ago, hurt by lower pricing that was mitigated somewhat by lower input costs and cost reduction programmes. The figure was in line with the fourth quarter of 2019. Turning to Covid-19 uncertainty, Mondi said it has postponed non-essential capital expenditure and slowed down some of its major capital projects. It also will no longer propose 2019's final dividend at its upcoming annual general meeting.
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COMPANIES - FTSE 250
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Trainline said it has a "secure" liquidity position and has paused marketing and other discretionary spend in order to mitigate the fallout from Covid-19. Since listing in June 2019, the transport ticketing platform said it has delivered "strong growth" in net ticket sales, revenue and earnings while significantly reducing net debt. "Given a significant fall in industry passenger numbers over the past month as a result of the COVID-19 lockdown, we have taken quick and decisive measures to reduce operating costs and cash outflows," the firm said. As a result, Trainline's cash outflow from operating costs and capital expenditure has reduced to around GBP8 million to GBP9 million per month. "We remain confident we can operate through an extended downturn period if required, without any further cost mitigation," the company said.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Restaurant Group said it has placed 98.2 million shares with investors, with another 100,000 subscribed by directors, at a price of 58.00 pence each, raising around GBP57 million. The placing price represents a 3.2% discount to Wednesday's closing price of 59.90p. The new shares represent about 20% of the total before the placing.
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Tiziana Life Sciences said it has developed a new technology for treating Covid-19. This uses a handheld inhaler to provide direct delivery of antibodies into lungs. Tiziana said it has submitted a patent application for the delivery technology.
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COMPANIES - INTERNATIONAL
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SAP lowered its earnings expectations for 2020 amid coronavirus uncertainty. The Walldorf, Germany-headquartered enterprise software company reported total revenue increase of 7% in the three months to the end of March to EUR6.52 billion. SAP said operating profit in the first quarter increased significantly primarily due to a lower impact from both restructuring expenses and share-based compensation expenses than a year before. Operating profit more than doubled year-on-year to EUR1.21 billion. Looking forward, SAP revised its outlook, assuming a challenging demand environment caused by the virus pandemic.
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Google will block Zoom video conferencing software on its employees' computers over concerns about security and privacy, Buzzfeed reported. The app does not meet Google's security requirements, the news website cited a company spokesman as saying. However, employees could still use Zoom privately in their web browser or on smartphones and tablets, he said. Google's own Meet service is competing with Zoom for users and attracts more than two million users daily, a Google manager told the technology website CNET. Google is part of Alphabet. Meanwhile, Zoom has appointed former Facebook security chief Alex Stamos as an adviser to improve security as the company's explosion in growth has ushered in wide-spread criticism of user safety.
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Air France KLM said its traffic, capacity and load factor all were hurt by global travel bans caused by the new coronavirus pandemic. The Franco-Dutch airline said it will suspend monthly traffic releases until further notice amid the swingeing capacity reductions due to Covid-19. The long-haul carrier's traffic fell by 51%, with its load factor decreasing by 21.6 basis points to 65.4% in March. Air France said it carried 3.1 million passengers in March, down 57% year-on-year. The company noted that special flights have been operated by Air France, KLM and Transavia to repatriate citizens to their home countries, in close cooperation with the governments of France and the Netherlands. For April and May, Air France said it foresees over 90% of planned capacity to be suspended as a consequence of the globally imposed travel restrictions to counter the spread of the Covid-19.
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Thursday's Shareholder Meetings
Manx Financial
Smith & Nephew
Helios Towers
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By Tom Waite; thomaslwaite@alliancenews.com
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