Stock markets tumble as Ryanair and RBS warn on coronavirus damage – business live

The unions have had some time to swallow the bitter pill that is Ryanair’s decision to cut as many as 3,000 jobs. Unite will argue that the decision should be reversed.

Referring also to British Airways’ decision to cut 12,000 jobs, Unite national officer for aviation Oliver Richardson said:


This is another premature announcement, especially while the government’s job retention scheme remains fully up and running.

Ryanair has significant cash reserves and is in a better place than many airlines to cope with the challenges that the Covid-19 pandemic has created.

The union also called for the government to intervene with aid for the sector, despite concerns over its environmental impact.

Most of Europe may be on holiday today, but for investors in the UK and US May day is not looking very relaxing.

The FTSE 100 has lost 2.1% so far, to 5,775 points. The FTSE 250 is down by 1.7%.

Markets in the US open in just over three hours, and stock market futures are pointing to heavy declines. The Nasdaq is set to fall 2.5%, the Dow Jones industrial average is expected to lose 1.9% and the S&P 500, the most important benchmark, is set to lose 2%.

An interesting story on the insurance industry this morning: the Financial Conduct Authority wants the courts to clarify whether businesses can claim money for business interruption caused by the coronavirus.

The Cit watchdog also told all insurers to assess whether they should be giving partial policy refunds during the pandemic.

A lot of companies have been distraught to hear that their insurance will not pay out because pandemics are not covered by their terms. Fine print like that has helped the insurance industry to weather the first storm (although recession will likely weigh on their profits eventually).

Christopher Woolard, interim chief executive of the FCA, said:


We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy.

In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value.

Huw Evans, director general of the Association of British Insurers, said:


This is a welcome step from the FCA and insurers will look to work closely with the regulator to make this process a success.

Although the vast majority of business interruption policies do not cover pandemics and the Government has confirmed it will not seek to retrospectively amend contracts, we support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered.

Battening down the hatches is the metaphor of choice to describe the Bank of England’s lending data, as the coronavirus storm hit.

The data don’t contain any of the government’s emergency loan schemes, so expect much more in April.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said:


April data will be more illuminating, as they will reflect the impact of the furlough scheme and rising unemployment on households’ incomes and cash holdings. But with all households seemingly running a very tight ship at present, excess savings should accumulate this year, potentially laying the ground for a strong rebound in spending in 2021, when the virus should no longer be a threat.

Back on those extraordinary Bank of England data, households paid back £2.4bn of credit card debt – suggesting a huge fall in consumption that almost certainly augurs a recession.

There was £5.4bn less lending to households than February – and that was with only a week of full lockdown. April’s data will certainly be interesting…

Businesses work differently to households: they took on new loans at record rates as they tried to secure liquidity, while also piling up as much cash as possible in their bank accoutns.

Overall sterling money holdings and borrowing – basically what cash companies and households have easily to hand – both rose to their all-time series highs, of £57.4bn and £55.3bn respectively.

Shaun Richards
(@notayesmansecon)

The rise in UK Money Supply was the LARGEST seen for households and businesses since records began in 1963. https://t.co/GswKsm15kf

May 1, 2020

Broad money (M4) rose by the most on record (since 1963) in March.

Broad money (M4) rose by the most on record (since 1963) in March. Photograph: Bank of England

A shopper walks through a near-deserted Intu Trafford Centre shopping mall amidst the novel coronavirus Covid-19 pandemic.

A shopper walks through a near-deserted Intu Trafford Centre shopping mall amidst the novel coronavirus Covid-19 pandemic. Photograph: Oli Scarff/AFP via Getty Images

It is a torrid time for Trafford Centre owner Intu, facing the prospect of companies unable or refusing to pay rent in its shopping centres.

Joanna Partridge
(@JoannaPartridge)

Indebted shopping centre owner Intu has appointed a Chief Restructuring Officer, to help as it “works through its strategy to fix the balance sheet”.Intu has received 40% of rent due on 25 March, criticises “a very small number of cases where customers are not currently engaging”

May 1, 2020

The Guardian’s Joanna Partridge writes:


Intu says it’s offering monthly rental payments to its retail tenants, but is scathing about “large, well-capitalised brands who have the ability to pay but have chosen not to”.

As it grapples with a collapse in rental income, the owner of the Trafford Centre in Manchester and Lakeside in Essex has agreed waivers with some of its lenders, particularly the seven banks which provide its overdraft facility, to prevent potential breaches. It had warned in late March that it would breach the terms on its debt commitments following a collapse in rent.

Updated

The final reading of IHS Markit’s manufacturing purchasing managers’ index (PMI) confirms what we already knew: it is a dire situation for British factories.

The UK’s manufacturing PMI reading came in at 32.6 in April, slightly worse than the flash reading of 32.9. That’s confirmed as a record low.

A reading of 50 is expansion, so 32.6 is… very low.

Manufacturing output fell to its lowest on record in April, according to IHS Markit.

Manufacturing output fell to its lowest on record in April, according to IHS Markit. Photograph: IHS Markit

There were survey-record contractions in output, new orders, employment and new export business. Lead times for products were also at record levels as supply chain disruptions hit.

Rob Dobson, director at IHS Markit,said:


UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey’s 28-year history.

Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19. The only pockets of growth were seen at firms making medical and food products.

Updated

Credit card lending falls for first time on record – Bank of England

UK consumers’ credit card debt fell in annual terms for the first time since the Bank of England started tracking the data in 1987 in March, as lockdown froze spending but job guarantees kept millions in work.

The annual growth rate of credit card lending fell to -0.3%, the first negative annual growth since the series began.

British households repaid £3.8bn of consumer credit, which also includes personal loans, during the month – the largest on record.

The consumer debt repayment was the largest since Bank of England records began in 1987.

The consumer debt repayment was the largest since Bank of England records began in 1987. Photograph: Bank of England

UK consumer credit growth and mortgage approvals both lowest since 2013

The amount of credit offered to UK consumers grew at the slowest pace since 2013 in March, while the number of mortgage approvals fell to its lowest in the same period, according to the Bank of England.

Mortgage approvals for house purchase fell to 56,200, their lowest level since March 2013.

The weak net flows of consumer credit meant that the annual growth rate fell to 3.7% in March, lowest since June 2013.

Some interesting moves on currency markets after Donald Trump last night suggested that he might try to hit China with more tariffs in retaliation for its role in the crisis.

The US president said last night that a trade deal with China was now of secondary importance to the coronavirus pandemic. He also threatened new tariffs on Beijing and said he had seen evidence for the unproven theory that Sars-CoV-2 originated in a Wuhan infectious disease lab.

The prospect of another bout of economic warfare has weighed on the Chinese yuan traded in Hong Kong.

*Walter Bloomberg
(@DeItaOne)

OFFSHORE-TRADED CHINESE YUAN FALLS 0.7% TO ONE-MONTH LOW VS DOLLAR AFTER US PRESIDENT TRUMP THREATENS TARIFFS AGAINST CHINA pic.twitter.com/EOqeOONcQ8

May 1, 2020

The British and Irish aviation industry appears to be running what basketball fans might term a full court press when it comes to requesting state aid: Heathrow Airport’s boss is also asking for help.

John Holland-Kaye, according to Reuters, has said the government maybe doesn’t understand how important aviation is for the rest of the economy. Virgin Atlantic (a major presence at Heathrow) may go bust without help, he said.

It is disappointing that the UK stands out from other countries in not offering state aid to its airline industry, he said.

That echoes the criticisms of Ryanair’s chief executive. However, the UK government has been wary of bailing out airlines and their wealthy shareholders – particularly the billionaire-controlled Virgin Atlantic.

There has also been sustained pressure for the government not to help some of the economy’s biggest polluters without conditions that they cut emissions.

Heathrow’s comments came as it reported that passenger numbers declined by 18.3% during the first three months of 2020 to 14.6m and are expected to bedown by around 97% in April.

Spending has been reduced by £650m. The airport could sustain itself for 12 months even with no passengers, it said.

In the barrage of corporate news earlier, we didn’t cover Nationwide’s house price index, which showed that the housing market was actually heating up before the crisis.

Annual house price growth increased to 3.7% in April, up from 3% in March-the fastest pace since February 2017 (when annual growth was 4.5%).

That was the seventh month of growth in a row. The average price was £222,915.

But with something of a caveat: it didn’t take into account the biggest health and economic crisis of our lifetime. Before the lockdown unemployment and borrowing costs were low, while the general election had given buyers some short-lived certainty.

Robert Gardner, Nationwide’s chief economist, said:


It’s important to note that the impact of the pandemic is not fully captured in this month’s figures. This is becauseour index is constructed using mortgage approval data, and there is a lag between mortgage applications being submitted and approved.

Indeed, circa 80% of cases in the April sample relate to mortgage applications that commenced prior to the lock-down, and hence before the full extent of the impact of the pandemic became clear.

Here are the graphs. Note the recent pick-up:

House prices accelerated before the lockdown, according to Nationwide.

House prices accelerated before the lockdown, according to Nationwide. Photograph: Nationwide

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