- Merkel tells Germans shops and restaurants will re-open
- ADP says 20.2m Americans on private payrolls lost jobs in April
- UK builders suffered worst slowdown on record in April
- Eurozone under threat from record economic plunge, Brussels warns
- German factory output suffers sharpest fall on record
- CMA blocks JD Sports’ Footasylum takeover
- ITV advertising revenue dropped 42pc in April
- Jeremy Warner: Whether a V or U-shaped recovery, the economy is already off the bottom
Well that's it for today, join us again tomorrow. Louis Ashworth will be with you bright and early.
Here's a short recap of what moved markets today...
- The world's main stock markets brushed off data showing the extent of the economic damage wrought by measures to slow the spread of the new coronavirus.
- Top among that data: more than 20.2 million US private sector jobs were destroyed in April according to payrolls firm ADP.
- Nevertheless, US stocks pushed higher at the open, but the Dow had dipped into the red by the close of European trading.
- The ADP figures are seen as an indicator of the all-important government non-farm jobs report due out Friday, which economists expect to show 28 million jobs lost in the month due to the widespread business shutdowns to contain the virus.
- European stock markets nursed modest losses while Asian indices mostly rose, and oil prices slid.
Boris Johnson said he could begin to ease a nationwide coronavirus lockdown next week, while Belgium is to open shops on Monday. But fears of a second virus wave as the lockdown eases have been keeping traders on their toes.
What to look forward to tomorrow:
Interim results: Cushman & Wakefield
Full-year: AA, BT, Equiniti, Morgan Sindall
Trading statement: Barratt Developments, IMI, InterContinental Hotels, Melrose Industries, National Express, Provident Financial, Rathbone Brothers, Reach, RSA, S4 Capital, Superdry, TheWorks.co.uk, Trainline
Economics: MPC decision, Halifax house price index (UK); Caixin services PMI (China); industrial production (Germany); jobless claims (US)
Firms fear wave of legal claims as employees go back to work
Firms could be forced to fend off a wave of legal action from staff over health and safety rules and unfair dismissal as the country gets back to work, lawyers have warned.
Companies which suffer a Covid-19 outbreak at work could be hit with cases brought by employees for failing to protect them from the disease, while the likelihood that many firms will have to lay off staff when the Government's furlough scheme ends could also spark a wave of legal challenges.
David Greenhalgh, an employment consultant at law firm Joelson, said: “I think there will be a massive increase in claims because people will be losing their jobs on quite a wide scale.
NY Times posts record gain in digital subscriptions
The New York Times saw a record gain in digital subscriptions in its latest quarter and doubled its online readership in March despite the pandemic biting into advertising revenues.
The US daily said it added 587,000 new digital subscribers to hit five million. Including its print subscribers, the total is 5.8 million.
Net profit in the quarter rose 9pc to $32.8m and total revenues climbed 1pc to $444m as higher digital-only subscription and other revenues were offset by lower advertising revenues and higher costs.
New York Times Co. president and chief executive Mark Thompson said it was pledging to keeping up its coverage during the global coronavirus pandemic.
The FTSE 100 crept 0.07pc higher today at 5,853.76 while the FTSE 250 fell 0.69pc to 15,982.47.
In the eurozone, the German DAX fell 1pc to 10,606 as the French CAC also dropped 1pc to 4,433.
"The stock market isn't trading from a standpoint of 'what have you done for me lately'. It's trading from a standpoint of 'what will you do for me later', and in its mind, what comes later is going to look a lot better than what has come lately," said market analyst Patrick J. O'Hare at Briefing.com.
"That's why it continues to hold its ground in the face of ugly economic data and downbeat earnings news," he added.
Fears grow over fraud risks...
Concerns about the lack of competition in UK business banking have been reignited amid fears some firms could be locked out of the government's new loan scheme due to the lack of accredited lenders, my colleague Lucy Burton writes.
The country's biggest banks have been flooded with demand for so-called Bounce Back Loans since launching on Monday, with the Treasury confirming that more than 69,000 loans worth £2bn had been approved within 24 hours of launching.
However there are concerns that only eight banks have so far been accredited to offer the loans, meaning those who bank with alternative lenders could have a long wait before they can access the money. Banks offering the loans are prioritising their current customers.
Oliver Prill, the chief executive of online lender Tide, said the bounce back loans scheme is "stifling competition" and will further hit financial technology companies.
"Small businesses have to have an account with an accredited lender to be able to apply for a loan, and Tide members have been told to switch to them in order to access the loans," he said.
FTSE 100 outperforms eurozone
We will take a look at the final closing numbers shortly but it looks at if London's benchmark index has outperformed its continental peers.
David Madden of CMC Markets says:
The morning session was mixed as some optimism in relation to the easing of lockdowns was doing the rounds. There was no clear direction in European indices this morning and volatility was low. The markets that were already in the red, lost ground at a quicker pace when US trading got underway. The FTSE 100 has handed back some of its earlier gains, but still in positive territory.
Meanwhile the US dollar index is up for a third day in a row, which is putting pressure on EUR/USD as well as GBP/USD.
Third of restaurant and pub bosses expect to close permanently
A third of restaurant and pub bosses have said they expect to permanently close sites as a result of the coronavirus pandemic.
A survey of more than 120 senior executives for pub, bar and restaurant companies revealed that 32pc said they anticipated the need to shutter sites for good.
The CGA business confidence survey, which was conducted with technology specialists Fourth, also revealed that bosses in the sector remain "deeply pessimistic" about the future of the hospitality market and their own businesses.
Only 36pc of leaders said they believe they will eventually re-open all of their sites for trading, according to the survey.
"The size and shape of the eating and drinking out market is projected to look very different post-lockdown," said Karl Chessell, director of food and retail at CGA.
"The offer will inevitably change as leaders have to change their operating model to thrive once they open their doors again."
Read more here:
History-making ADP nonfarm figure means little to Dow Jones and dollar
"In a potential preview of how Friday will pan out, the US markets shook off a record-breaking ADP nonfarm employment change reading, Connor Campbell from SpreadEx says". He adds:
Though the figure was marginally better than forecast, such a fact means little when that still means 20.236 million jobs were lost across April.
It seems investors just aren’t that fussed about the job loss, as long as it seems that Donald Trump is hellbent on opening up the economy, even if it means more American deaths.
The Dow Jones rose around 70 points despite the data, keeping it around 23950. Its gains likely would have been larger if it weren’t such a strong day for the dollar, which added 0.8% against the pound and 0.5% against the euro.
While both sterling and its single currency cousin were in the red, the reaction for the European indices carried. The DAX and CAC shed half a percent apiece, effectively the same amount the FTSE actually rose by as the session went on.
Full report: Uber plans for swathe of lay-offs
My colleague Matthew Field has a full reports on Uber job-cut plans. He writes:
The US firm announced it would cut headcount of its 20,000 plus staff by more than 14pc in cost cutting due to the pandemic, reducing customer support staff and recruitment teams.
Dara Khosrowshahi, Uber chief executive, will forgo his remaining salary for 2020, the company said in a US regulatory filing.
Khosrowshahi signaled that more “difficult adjustments” would be put forth in the next two weeks. “Days like this are brutal,” he wrote in an email to staff.
The cuts come ahead of results due to be announced on Thursday that are expected to show the dire impact coronavirus has had on the ride-hailing sector. Lyft, Uber's main rival, cut 17pc of roles last week.
Germany eases lockdown: more details
Here are some details from Bloomberg’s report on Angela Merkel’s announcement today:
Germany will take its biggest step yet in relaxing curbs to contain the coronavirus, as the country prepares to open restaurants and all shops as well as restart professional soccer games. Although many lockdown measures are being gradually phased out, limits on public contact will remain for weeks or months to come, and restrictions may be reinstated locally if a hotspot emerges.
Chancellor Angela Merkel urged Germans to stick to social-distancing rules to stem the risks of a second wave of infections.
“We can say today that we have the very first phase of the pandemic behind us,” Merkel said on Wednesday after talks with leaders of Germany’s 16 states, adding that the fight against the disease is still in its early stages.
Merkel says Germany will ease curbs
Over in Germany, Chancellor Angela Merkel has said the country will ease its curbs because the first phase of coronavirus has passed. I only have a couple of lines flashing over the wires currently, but Bloomberg reports she has said all shops will re-open.
The BBC says general contact rules “will continue for another month”.
Addendum: For all football fans, it appears she has also said the German Bundesliga season is able to resume this month.
Joint pains: Profits halve at Smith & Nephew
Medical device maker Smith & Nephew saw sales almost halve in April as the pandemic forced elective surgeries to be put on hold.
My colleague Hannah Uttley reports:
The FTSE 100 company reported a 7.6pc fall in sales to $1.1m (£890,000) during the first three months of the year as the coronavirus outbreak hammered all three of its business units.
Smith & Nephew, which makes orthopedic hip and knee replacements and also specialises in sports medicine and wound care, said the impact during the period was greatest in China, where sales were down by half.
It has since begun to see signs of recovery in China, but the mass cancellation of hip and knee surgeries elsewhere caused sales to tumble 47pc in April.
Non-essential surgeries have taken a backseat as under-pressure healthcare systems focus on treating coronavirus patients.
Uber to cut 3,700 jobs
The ride-hailing firm has said it will cut 3,700 jobs, or about 14pc of its workforce, as it looks to conserve cash to weather the pandemic.
Dara Khosrowshahi, the firm's chief executive, will also waive his base salary for the rest of year.
It comes after reports last week that the ride-sharing giant was considering laying off as many as 20pc of its employees.
The company has never turned a profit and lost $8.5bn (£6.84bn) last year.
Full report: Eurozone activity plunges
My colleague Tom Rees has updated his report on the European Commission’s growth prediction with more details on this morning’s dire activity data. He writes:
The commission’s gloomy forecasts came as the purchasing managers’ index revealed that activity in the eurozone collapsed to the lowest level on record in April.
The composite PMI tumbled to an unprecedented 13.6, down from March’s previous record low of 29.7.
Spain’s reading slipped into single digits and Italy’s fell to 10.9 as the services industry led the sharp decline. Any reading below 50 indicates a contraction.
Profits plunge at Virgin Money
Virgin Money's profits have plummeted after it put aside £232m to cope with a surge in unemployment and the removal of government wage support.
My colleague Lucy Burton reports:
The UK's sixth-largest lender based the figure amount on a 10pc decline in GDP this year and unemployment hitting 9.7pc in the first quarter of 2021. More than half of British adults are being funded to some degree by the state.
Joseph Dickerson at Jefferies said the lender's outlook will "be the source of much gnashing of teeth" among analysts. The provisions meant its pre-tax profits more than halved to £120m for the first half of its financial year.
David Duffy, chief executive of Virgin Money, said lockdown has had little effect on customers so far to the unprecedented level of government support, but future pain was expected when these schemes were removed.
Actual figures likely to be worse
Dire as the job losses are, they like show only part of the damage – as I mentioned in my 1:13pm post, we already know jobless claims have soared past 30m.
The report likely still understates the actual damage done during the implementation of social distancing measures. ADP used the week of April 12 as its sample period, similar to the method the Labor Department uses for its official nonfarm payrolls count. The subsequent weeks in the month saw some 8.3m more Americans file for unemployment benefits and economists expect another 3m last week.
ADP: Job losses in April double financial crisis
Ahu Yildirmaz, co-head of the ADP Research Institute, which gathered the data, said:
Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession. Additionally, it is important to note that the report is based on the total number of payroll records for employees who were active on a company's payroll through the 12th of the month. This is the same time period the Bureau of Labor and Statistics uses for their survey.
ADP: US lost 20.2m jobs in April
Ouch! Not *quite* as bad as expected, but the ADP Research Institute says the US lost 20.2m jobs in April, based on its extrapolation of private payroll data. It also made a nasty correction to March’s figures, revising a 27,000 job fall to 149,000.
What’s most striking is how that drop compares to the financial crisis – that now small-looking red patch near the start of the chart.
Coming up: US payroll data
In a couple of minutes, we’ll get the latest US payroll data from ADP, the HR company. The data usually serves as a decent indicator of Friday’s non-farm payrolls data.
Economists and analysts are expecting a striking drop – remember that more than 30m Americans applied for unemployment benefit over the six weeks ending April 25th.
- Read more: 30 million Americans lose their jobs
Oanda’s Craig Erlam said: “the ADP may attract a little more attention than normal ahead of the worst jobs report we're ever to likely witness”.
Expectations (per Bloomberg) are for a change in employment for 20.5m in today’s numbers.
National Express plans share issue to shore up cashpile
National Express has announced plans to tap investors for fresh cash by placing nearly 20pc of its share capital to strengthen its balance sheet.
My colleague Simon Foy reports:
The coach operator said the move had the “unanimous support” of its board, some of whom will contribute approximately £1m to a subscription alongside the placing.
The total number of subscription and placing shares will not exceed 102.3m, it said, which represents around 19.99pc of the firm’s existing share capital.
A share issue below 20pc of existing shares avoids the need to produce a prospectus.
It came as the FTSE 250 company, which suspended its UK coach network last month, warned that core profits could fall up to 40pc in a worst-case scenario this year due to the pandemic.
It added that demand for its services could remain as much as 25pc down on pre-virus levels until the end of next year.
Customers left unable to spend as Virgin Money locks down cards
Virgin Money has blocked tens of thousands of credit card accounts, leaving customers unable to spend at a time of major financial pressure.
My colleague Adam Williams reports:
The bank has two million active credit cards and Telegraph Money understands that about 32,000 accounts have been blocked.
Industry analysts suggested the City watchdog, the Financial Conduct Authority, would take a dim view of accounts being blocked at this time. The regulator has repeatedly called for firms to treat customers fairly during the coronavirus crisis.
In a letter to customers, Virgin said it had reviewed their financial position and had decided to stop any further spending on the card. Customers will be required to pay off any outstanding debts on the same terms as before.
WH Smith shares drop ahead of results next week
It’s not the most exciting day on the mid-cap FTSE 250, which is up just 0.3pc currently. That being said, WH Smith is standing (for the wrong reasons). The retailer has dropped as much as 12pc today, and is currently down about 10.6pc.
Traders appears to be selling off ahead of the group’s first-half results next week, which seem certain to show a severe decline in its performance amid a widespread fall in travel that will have devastated its key travel hub sites.
Bloomberg reports the group is down 63pc this year – making it the second-worst performer across Europe’s Stoxx 600 retail index.
Twitter steps up pushback against 5G conspiracies
Twitter will begin prompting people who tweet about the 5G coronavirus conspiracy theory to read British government-verified information about the technology.
My colleagues report:
The theory, which has spread on social media, has resulted in attacks on mobile telecoms masts and abuse directed at engineers in Britain. Scientists, phone companies and the government have said it is completely untrue.
Twitter said the search prompt would inform users that the government had seen no link between 5G and COVID-19, and include a link to a government website with credible, factual and verified information in relation to 5G.
Katy Minshall, Twitter UK's head of government, public policy and philanthropy, said the move was the latest step in its focus on connecting people with authoritative information regarding Covid-19.
Boris Johnson has returned to the Commons today for his first session of Prime Minister’s Questions since he contracted Covid-19. You can follow along with our Politics Live Editor Cat Neilan here:
<br> Here are some of the day’s top stories from the Telegraph Money team:
Direct Line suffers sharp fall in claims
Direct Line received 70pc fewer car insurance claims in April as roads fell quiet during the Covid-19 lockdown.
My colleague Michael O’Dwyer reports:
The insurer, which also owns Churchill, warned that while claims had fallen the average cost of each accident would increase as longer repair times mean it will have to pay more to provide hired cars for customers.
The FTSE 250 company said it expected to take a £44m hit on travel insurance claims if Government travel restrictions remain in place until September. Reinsurance contracts, which are used by insurers to pass on some of their risk, would reduce the total impact to £25m above normal claims levels, it said.
Direct Line, which withdrew its proposed £198m dividend last month after regulatory pressure on the industry to preserve capital, wrote £790m of new business in the first three months of the year, a 4.7pc increase on the same period a year ago.
The insurer is one of the stronger performers on the FTSE 250 today:
Eurozone retail sales slump most on record
Apologies for the slight delay on these – here are the (awful) eurozone retail sales numbers for March.
The figures were even worse than expected: sales dropped 11.2pc month-on-month, and 9.2pc year-on-year, in the steepest fall on record (I’ve shown to 2005 here, but records go back to 1999).
Here are more details, via Reuters:
The only brighter spots were a sharp 5.0pc month-on-month rise in food sales and a 2.6pc increase for mail order and internet shopping. Even pharmaceutical and medical sales dropped, by 0.5pc.
The sharpest sales declines were for clothing, footwear and textiles and for automotive fuel.
The steepest national fall was in France at minus 17.4pc month-on-month. Luxembourg, Austria and Spain were not far behind. There was no March data for Italy or Greece.
Ireland was the only country to register an increase, with sales going up 0.1pc from February, although retail figures are often revised.
Full report: European Commission predicts severe slowdown
Here’s my colleague Tom Rees’ full report on the European Commission’s dire economic warning:
Hammerson ditches deal to sell retail parks
Shopping centre landlord Hammerson has terminated a £400m deal to sell seven retail parks after the buyer refused to pay up by the agreed date.
My colleague Simon Foy reports:
Last month, Hammerson said it served a notice to private equity firm Orion specifying that it is required to complete the deal by May 6th.
The group said: “Following close of business on 5 May 2020, Orion notified Hammerson that it had resolved not to complete [the sale and purchase agreement] on 6 May 2020.”
Hammerson said it will now access a £21m deposit held in escrow by its solicitors.
In February, the group said the deal was to be the largest such transaction in the UK in the last decade.
The property investor has looked to improve its balance sheet by disposing of some of its portfolio to focus on its flagship sites and premium outlets.
It was tipped as a takeover target by Stifel analyst John Cahill at the end of March as rent payments dried up due to the coronavirus pandemic. it also suspended its dividend and scrapped its guidance for the year.
EU: Covid-19 shock puts survival of euro at risk
Brussels has warned an “uneven” economic recovery across Europe “poses a threat to the single market and the euro area” as its leaders predicted a record-breaking plunge in output in 2020.
My colleague Tom Rees reports:
The European Commission said the region is suffering “an economic shock without precedent since the Great Depression” and will stage an “incomplete recovery”.
Eurozone GDP will slump by a record 7.7pc in 2020 and the loss in output will not be recovered until the end of 2021, the EU executive predicted. The wider EU will see a 7.4pc drop in GDP this year before seeing a 6.1pc rise in 2021.
Paolo Gentiloni, European Commissioner for the economy, urged the region to “rise to the challenge” and make “decisive, joint European action”.
He said the depth of the recession and strength of recovery will be “uneven” and depend on the speed Covid-19 lockdowns are lifted, the importance of tourism to an economy and the country’s financial health.
Here’s how the figures look (easier tweet format below):
Full report: Anger over Ocado boss’s £54m bonus
My colleague Laura Onita has a full report on Ocado’s results this morning, including mounting anger over the boss’s substantial payout. She reports:
The trading update came as an Ocado shareholder pledged to vote against a £88m windfall for bosses, including a £54m bonus for chief executive Tim Steiner at its annual meeting on Wednesday...
Ashley Hamilton Claxton, head of responsible investment at Royal London Asset Management, said Ocado’s pay report was an example of how poorly designed incentive plans can lead to excessive pay for executives.
- Read more: Ocado faces revolt over £54m bonus for boss
UK PMIs: Sector-by-sector
As promised, here’s a comparison of the UK’s PMIs by sector (I’ve included the composite reading in case it’s interesting).
For anyone just joining us, the gauage of UK construction activity dropped devastatingly low in April, hitting a record low. A reading beneath 50 indicates contraction.
Manufacturing many look (relatively) stable, but it’s worth casting our economic minds back and remembering some of the issues with the metric – because of the way it designed, order backlogs are taken to indicate high demand, and therefore strong performance. That doesn’t account for the kind of end-to-end supply-chain disruption we have been seeing: so the numbers are slightly flattered as a result.
Here’s more from our Economics Editor Russell Lynch on some general tips for reading PMIs:
The PMI is a diffusion index, based on the responses of businesses to whether things like orders or employment have been increasing or decreasing over the month.
As such it measures breadth rather than depth. As the Office for National Statistics pointed out in a comparison of PMIs with the official data last autumn, “diffusion indices, unlike official estimates, do not account for the magnitude of changes in output in individual respondents”.
For example, if two small businesses had seen rising output but one firm had seen a big fall – leading to an overall decline in output – that might not show up in a PMI.
“Even when diffusion indices share the same base data as official estimates of output, the two indicators can give very different conclusions about economic performance,” said the ONS.
Construction PMI: What the experts says
Pantheon Macroeconomics’ Samuel Tombs hasn’t minced his words, calling today’s constrution-sector data a “total collapse”. He wrote:
Further ahead, it’s encouraging that the government remains committed to higher levels of investment and that banks are in a better position than after the 2008/09 crash to finance commercial construction projects and mortgages that underpin housebuilding. But demand for office space likely will remain extremely weak, now that firms have adapted to their employees working from home and are looking to cut costs. Accordingly, we doubt that construction output will return to its pre-virus high until 2022.
Capital Economics’ Thomas Pugh added:
The collapse in the construction PMI in April confirms that no sector of the economy has been spared from the slump in activity.
Taking a broader view of the construction gauge and the other readings we have already seen (I’ll round them up in my next post), he added:
However, we doubt that the survey is capturing the true scale of the loss of economic activity. Note that the survey doesn’t include the retail sector, which has done even worse judging by footfall data (except for supermarkets). We are currently expecting a 25pc peak to trough fall in GDP.
Construction slowdown: Key takeaways
Here are some key points from IHS markit’s report on UK construction-sector activity:
- All three main categories of construction work experienced a survey-record fall during April, with declines in house building (7.3) and commercial activity (7.7) exceeding that for civil engineering (14.6)
- April data also highlighted a severe impact on construction supply chains, with closures at builders merchants and stoppages of manufacturing production leading to widespread supply shortages
- The latest lengthening of average lead times for the delivery of construction products and materials was by far the steepest since the survey began in April 1997
- New business volumes fell at a rapid pace in April
- Construction firms reported that staffing had dropped sharply in April
- Business expectations for the year ahead dropped slightly since March and equalled the survey-record low seen in October 2008
Tim Moore, economics director at IHS Markit, said:
The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic...
A drop in construction activity of historic proportions in April looks set to be followed by a gradual reopening of sites in the coming weeks, subject to strict reviews of safety measures.
He added that the sector’s recovery still faces numerous threats:
However, the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment. Looking ahead, construction companies widely commented on worries about cash flow, rising operating costs and severely reduced productivity, as well as a slump in demand for new construction projects
PMIs: Eurozone compared
There’s been an absolute torrent of data this morning, so if you’ve been struggling to keep track of everything, here’s how the composite PMI readings across Europe have compared (I’ve chucked in the UK for the sake of comparison):
If you want to play around with the chart, clicking on a country in the legend should hide it.
The European economic wave isn’t over yet, however – we still have eurozone retail sales data for March coming out on the hour. Expect another heavy falls: economists polled by Bloomberg expect a month-on-month slump of 10.6pc, compared to February’s 0.9pc gain.
UK construction activity shockingly low
Rounding out this morning’s string of PMI releases comes a big shock: UK construction activity plummeted well below expectations, with an April reading 8.2 compared to March’s 39.3.
Analysts polled by Bloomberg had been expecting a reading of 21.7 (where a score below 50 indicates a contraction), so that is really quite a surprise. It’s the worst reading on record by some distance.
The fall represents widespread site closures and the virtual shutdown of Britain’s real-estate sector. Still, there’s reason to hope May might show an improvement, given many of Britain’s biggest housebuilders have already laid out plans to return to work.
IHS Markit and the Chartered Institute of Procurement & Supply, which gathered the data, said:
April data indicated by far the fastest decline in UK construction output since the survey began 23 years ago. The vast majority of survey respondents (86pc) reported a reduction in business activity since March, reflecting widespread site closures and shutdowns across the supply chain in response to the public health emergency.
Duncan Brock, group director at CIPS, said:
More vulnerable than other sectors that make up the UK economy, construction was unable to continue in any significant capacity, as companies grappled with furloughed staff and building sites under complete shutdown.
Eurozone PMIs: Key takeaways
Here are some key points from IHS Markit’s report on eurozone PMIs:
- At the country level, all nations for which both manufacturing and services data are available for endured survey record contractions in activity
- The restrictions in place to deal with the COVID-19 outbreak led to not only a considerable fall in activity, but unsurprisingly also a steep and unprecedented drop in levels of new business placed with eurozone companies
- Companies reported a steep and accelerated fall in backlogs of work in April
- Job losses mounted during April, with overall employment down for a second successive month
Chris Williamson, the group’s chief business economist, said:
The extent of the euro area economic downturn was laid bare by record downturns in every country surveyed in April, with output falling at unprecedented rates across the region’s manufacturing and services sectors.
With a large part of the region’s economy shut down while COVID-19 infections spiked higher, the economic data for April were inevitably going to be bad, but the scale of the decline is still shocking. The survey data are indicative of GDP falling at a quarterly rate of around 7.5pc, far surpassing the worst decline seen in the global financial crisis. Jobs are also being lost at a rate never previously seen.
Eurozone services sector suffers record drop
...and here’s the Eurozone-wide fears. Like Germany, the bloc-wide figures are slightly ahead of expectations, but we’re still in the territory of a historic contraction:
- Services: 12
- Composite: 13.6
IHS Markit, which gathered the data, said:
Reflective of the ongoing restrictions to nonessential economic activities in place across the region, the severe and unprecedented contraction in activity was replicated at the sector level. Both the manufacturing and services economies recorded record falls in output during April, with service providers again registering the sharper contraction.
French and German services sectors slump
These mornings are always a severe test of my chart-making speed, but here’s the latest PMI data for France and Germany.
Unlike for Spain and Italy, IHS Markit released ‘flash’ readings for these two, so we already had a pretty good idea of what to expect. With the final readings released, France was a little worse than expected, and Germany a little better – but both, to be clear, were awful.
As a reminder, a score below 50 indicates contraction.
Here’s how France came in:
- Services: 10.2 (flash: 10.4)
- Composite: 11.1 (flash: 11.2)
And here’s Germany:
- Services: 16.2 (flash 15.9)
- Composite: 17.4 (flash: 17.1)
Italian PMIs plunge
The fall isn’t quite as extreme as in Spain (see 8:22am update), but Italy’s PMI readings also suffered a heavy hit in April.
Here are the readings (where a score beneath 50 indicates a contraction):
- Services: 10.8
- Composite: 10.9
Both of those slightly beat expectations.
IHS Markit, which gathered the data, said:
The Italian service sector continued to contract during April, as the economic fallout from the coronavirus disease 2019 (Covid-19) virus intensified. Business activity and new business both declined at the sharpest rates in more than 22 years of data collection, with panellists linking the falls to lockdown measures and muted client demand stemming from the pandemic.
Here are some key points:
- Workforce numbers continued to decline, with the rate of job shedding accelerating to the most marked on record
- Driving the marked decline was a second consecutive reduction in incoming new business
- Cost burdens facing Italian service providers fell for the second month in a row
- The 12-month outlook for output remained negative in April, with firms expecting activity to fall further from current levels in the year ahead
Lewis Cooper, an IHS Markit economist, said:
With the manufacturing sector suffering a similar fate to services, the latest data highlight the substantial blow from the pandemic on the Italian economy. With the gradual easing of restrictions planned to begin in early May, next month’s data will give the first indication on how fast we can expect activity to recover in the short term
Ocado retail revenue jumps 40pc
Retail revenues at grocer/distribution-tech-innovator Ocado surged 40.4pc since the start of April as the group was handed a substantial boost by home shopping spurred by the Covid-19 lockdown.
The rise built on a 10.3pc increase during the first quarter. The FTSE 100 group said:
The number of items per basket appears to have passed its peak but remains high, as more normal shopping behaviours have returned, and the share of fresh and chilled products in the mix, relative to ambient, is also returning to normal.
Despite the sales rise, the group suspended its guidance for retail revenues this year, saying “there remain many uncertainties about the length of the crisis, customer reaction immediately post and its long term impact on customers' disposable incomes”.
The group has adapted its online platform and increased its order capacity in reaction to the lockdown. Ocado said it is “now delivering significantly more groceries to households than ever before”.
Tim Steiner, its chief executive, said:
Ocado remains in a strong position and while we should be grateful that our current challenges are around growth, expansion and increased demand, we have great empathy for all who are facing different challenges at this time. In retail, we are working with our small suppliers to make sure we pay them earlier than normal and we will work closely with any who are struggling
Spanish PMIs: Key takeaways
Here are some key points for the latest Spanish PMI data:
- All of the sub-sectors that data are collected for recorded considerable drops in business activity when compared to March
- Pessimism about the future sank to a new survey low
- Whilst several companies reported placing workers on furlough – amid indications that overall workloads had contracted at a record rate – there were still widespread reports of redundancies
- Price data pointed to the emergence of considerable deflationary pressures during April
IHS Markit’s Paul Smith said:
Given the restrictions on economic activity currently in place across Spain, April’s devastating PMI data may well not come as a surprise to many commentators.
Nonetheless, observing the sheer scale of the drop in many survey indicators lays bare the impact that the pandemic is having on Spain’s economy. Allowing for a likely shift in the traditionally strong linear relationship between GDP and PMI data, we estimate the economy is currently contracting at a quarterly rate of around 7pc.
Whilst startling enough, this figure may well prove to be conservative, with the depth of the downturn undoubtedly greater than anything we have ever seen before
Spanish business activity obliterated
Final purchasing managers’ index readings for Spain are in, covering the services sector’s performance in April.
They are dreadful: even worse than expected, they show the gauge (where a score below 50 indicates contraction) in single figures.
Here’s how the readings came in:
- Services: 7.1
- Composite (a weighted balance of services and manufacturing): 9.3
Those numbers are absolutely horrible, and represent a slowdown that impact nearly every company surveyed. IHS Markit, which gathered the data, said:
The Spanish service sector endured an extremely challenging month in April as government restrictions on non-essential economic activities inevitably impacted heavily on activity and demand. Record falls in service sector output and new business were recorded, whilst the sharp reduction in workloads and heightened pessimism about the future led to widescale job losses.
Reaction: ‘Heavy-handed’ approach from CMA
Shore Capital’s Greg Lawless and Clive Black have offered a pretty damning assessment of the CMA’s decision to block JD’s takeover of Footasylum:
We thought that the CMA’s role was to protect consumers. In our view, this looks like a heavy-handed regulatory approach and may have widespread implications for future retail M&A. Sports retailing is a global industry with third party brands competing for consumer’s share of spending. Given the context of Covid-19 we can not see a queue of buyers forming to purchase Footasylum, aside perhaps from Mike Ashley’s Sports Direct.
The CMA’s crystal ball of the view of the market, has in our view, failed to take into account the unfolding retail landscape. Quite what the UK retail landscape will look once the dust settles but the CMA has failed to account for the potential impact of the evolving retail market, given the challenges of Covid-19. One route still available to JD Sports is to consider making an application to the Competition Appeal Tribunal to review the decision.
Stifel’s Eleonora Dani struck a similarly disappointed note, saying:
We had hoped that, in light of the recent dramatic events affecting the UK retail environment (according to the ONS, in March 2020, UK sales volumes decreased by 35pc, the biggest monthly fall in over 30 years), the CMA would reconsider its decision, in particular after seeing the authority provisionally clearing Amazon’s investment in Deliveroo.
CMA blocks JD Sports’ Footasylum takeover
The competition watchdog has blocked JD Sports’ £90m merger with rival Footasylum, more than a year after the deal was first agreed.
My colleague Simon Foy reports:
The Competition and Markets Authority (CMA) said the deal would “lead to a substantial lessening of competition”, adding that consumers would be left with “fewer discounts or receiving lower quality customer service”.
Kip Meek, who was leading the investigation for the CMA, said: “Our investigation analysed a large body of evidence that shows JD Sports and Footasylum are close competitors.
“This deal would mean the removal of a direct competitor from the market, leaving customers worse off.
“Based on the evidence we have seen, blocking the deal is the only way to ensure they are protected.”
JD Sports said it disagreed with the decision, which relied on “inaccurate and outdated analysis of the UK sports retail” market.
- Read more: CMA blocks JD Sports takeover of Footasylum
German factory orders slump most on record
From slightly earlier this morning: German factories suffered their worst slump in orders on record in March as Covid-19 devastated demand. Orders fell by 15.6pc, blowing out expectations (as polled by Bloomberg) for a 10pc drop.
The fallest is sharpest since records began following reunification in 1990, but April could well be worse.
The figures echo a major slump in Germany’s PMI activity readings, and suggest the hit to production in Europe’s biggest economy could be larger than feared.
Germany’s economic ministry blamed the drop on coronavirus, saying production would take a sharp hit “from March onwards”.
ING’s Carsten Brzeski said the drop “adds more evidence to the depth of the economic crisis”. He added:
Let’s be clear: this is not only the result of the lockdown measures in Germany but also driven by the lockdown measures elsewhere and supply chain disruptions.
ITV revenue plunges
ITV revealed its advertising revenue tumbled 42pc in April as the lockdown sent the economy into deep freeze.
My colleague Chris Johnston reports:
The slide followed a 7pc decline in external revenue to £694m in the three months to March.
Revenues for ITV's Studios division slumped 11pc to £342m in the first quarter of the year as productions were forced to shut down due to coronavirus.
Chief executive Carolyn McCall said ITV had taken swift and decisive action to mitigate the impact of the pandemic by cutting costs and tightly managing cashflow and liquidity.
Agenda: Markets mixed as China reopens
Good morning. Global stocks are mixed as traders in China returned to work after a five-day break to assess the escalating tensions between the US and China.
Stocks in Shanghai recovered to trade little changed after opening slightly lower.
On Tuesday, oil gained as the economic outlook seemed to brighten with the markets' peak-to-trough fall now less than half what it was earlier in the crisis.
5 things to start your day
1) Virgin Atlantic plans to cut more than 3,000 jobs, dealing a fresh blow to the airline industry that has been brought to its knees by coronavirus. The airline piled fresh misery on Gatwick, saying it would turn its back on the airport where billionaire Sir Richard Branson launched Virgin Atlantic’s inaugural flight nearly 36 years ago.
2) Youth employment to hit 1m as 'Class of 2020' loses out: As many as 600,000 more 18-24 year-olds could become unemployed over the next year, the economics think tank said, on top of 408,000 in the age group who are currently out of work.
3) Pfizer launches human testing for coronavirus vaccine in US: Phase one of the US trials will see up to 360 healthy patients dosed with the vaccine, with subjects aged between 18 and 55 tested first, to determine whether it is safe to be given to older patients between 65 and 85.
4) Insurer Hiscox is set to raise around £400m to cash in on growth opportunities presented by Covid-19 while continuing to resist claims from thousands of business customers at risk of collapse due to the coronavirus lockdown.
5) Canary Wharf tries to plan for a post-Covid world: From facial recognition tools to on-site testing and barriers in lifts, the east London financial district will need a pandemic makeover
What happened overnight
Stocks in Shanghai recovered to trade flat after opening modestly lower as Chinese traders came back online after a five-day break.
Australian shares fell, while Hong Kong and Korean ones advanced. European futures retreated.
Oil prices added slightly to recent gains, while the yen climbed to the highest since mid-March, back when markets were roiled by emergency demand for dollar cash. Treasuries await London’s open, with Tokyo shut.
China’s onshore yuan fixing on Wednesday was slightly stronger than many expected, in wake of declines in the offshore currency during the Chinese holiday amid rising tensions with the US.
Fears of a renewed trade war have risen alongside Trump administration comments blaming China for the global pandemic.
Coming up today
Interim results: Metro Bank, Virgin Money
Full-year: Clarkson, Ocado
Trading statement: Direct Line, ITV, OneSavings Bank, Smith & Nephew
Economics: Construction PMI (UK); services and composite (eurozone); ADP employment change (US)