UK (Sky News)

Coronavirus: Stock markets pick up despite steady flow of grim corporate updates

By April 6, 2020 No Comments
Rolls-Royce aircraft engine

European stock markets have made a strong start to the week as investors eye a slowing in the rate of coronavirus infections in some worst-hit countries.

The FTSE 100 followed Asia higher in early dealings, closing more than 3% up, while the French CAC and DAX in Germany made similar but more lengthy strides of 4.6% and 5.4% respectively.

Friday’s session had seen guarded declines in values because of nerves around what could happen over the weekend.

Boris Johnson
PM admitted to hospital

But market analysts pointed to hope ahead after the reported rate of new infections and deaths slowed in Italy and Spain – suggesting their respective lockdowns were beginning to have an effect.

News that UK prime minister and COVID-19 sufferer Boris Johnson was in hospital for tests, was said to have weighed on the FTSE’s rebound.

The index was up 2% in the afternoon – still around 26% down from where it started the year.

There continued to be a steady stream of companies reporting on their exposure to coronavirus disruption.

Shares in aero engine-maker Rolls-Royce surged by more than 18% after it said it had secured an additional £1.5bn revolving credit facility to help it navigate the collapse in demand for flights.

The company, which is paid by airlines based on how many hours its engines fly, said it was focused on cutting its cash expenditure, including reducing salary costs across its workforce by at least 10% this year.

It scrapped its targets and final dividend.

Legal & General was up by 14% after the insurer said it planned to pay its 2019 dividend, even after a EU regulator said insurers should temporarily halt payouts.

A general view of a branch of WH Smith in London.
Image:Newsagent to bookseller WH Smith is heavily exposed to the travel sector

Among other companies updating the market, WH Smith – hit hard by the decline in business at its most lucrative airport and major train station shops – said it had secured new lending facilities of £120m.

It said the money was conditional on raising new equity and it was at an advanced stage of preparation for the placing – at a maximum of 13.7% of its issued share capital.

“These financing arrangements, coupled with a broad range of mitigating actions to manage the cost base and cash-flow, will provide sufficient liquidity to deal with this most challenging of trading environments,” WH Smith said.

BT said it had no plans to impose job losses – over the next three months at least – and would increase wages for workers by 1.5% from July though managerial and executive salaries would be frozen.

Chief executive Philip Jansen said he would donate his salary to the NHS and firms hit by the outbreak for at least the next six months.

Commenting on the wider market mood Naeem Aslam, chief market analyst at AvaTrade, said: “US futures and European markets are trading higher because investors are shrugging off the pessimism.

“They are focused on more optimistic things: the slowing death rate caused by coronavirus. Italy, Spain, France, and Germany have all seen declining numbers.”

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