Mar 30, 2020

Business: EasyJet grounds entire fleet in response to travel lockdown – live updates


Louis Ashworth, (now) Annelies Gartner, (earlier) 30 March 2020 • 




Oil in a ‘perfect storm’

With oil prices under fresh pressure, futures trading on West Texas Intermediate (that is, US) crude briefly dipped below $20 a barrel this morning, for the first time since 2002. Here’s the spot price for comparison:
Markets.com’s Neil Wilson said the black stuff has found itself in a “perfect storm” of soaring production and collapsing demand, adding:
The thing to stress is that we simply do not have any idea when demand will recover – it could take months to get back to some semblance of normality. And just as this is happening the Saudis are opening the spigots. It’s getting to the point where we run out of places to store the oil.
Cantor Fitzgerald’s Jack Allardyce warned that the pain is far from over:
 With major producers pumping barrels freely and the IEA suggesting that short-term demand could fall by a fifth due to travel restrictions, global storage is likely to hit capacity over the next two-to-three months. This is likely to be particularly damaging for US crude, with prices in the Permian region potentially hitting single digits.
While we believe that current levels are unsustainable in the medium term given achievable breakeven prices, the ongoing uncertainty around COVID-19 and apparent stalemate between Riyadh and Moscow is likely to cause continued downward pressure over the coming weeks.
Meanwhile, Bloomberg’s John Authers notes that the ratio of Brent crude futures to gold is at a record low, reflecting the extreme bearish mood that has gripped markets:
Some long-term perspective on oil. This is the ratio of Brent Crude futures to gold going back to 1989. It's at a record low, and the descent of the last few weeks matches that seen in 2008: pic.twitter.com/K9Goy4MYCH
— John Authers (@johnauthers) March 30, 2020

Pound weakens slightly after UK downgrade

The pound has lost some ground against the dollar this morning, after ratings agency Fitch downgraded the UK on Friday, citing concerns about the Government’s fiscal and monetary plan for tackling the economic shock of coronavirus.
Societe Generale’s Kit Juckes said Fitch’s view matters little given the context, adding:
The UK's aggressive fiscal reaction to the pandemic may alarm the models that drive credit ratings, but it is going to help the economy survive and more importantly, help it recover once the virus has gone.

Full report: EasyJet grounds entire fleet

My colleague Simon Foy has a full report on easyJet’s decision to ground its entire fleet. He writes:
The budget carrier said it completed its final rescue flight on Sunday, adding that there can be “no certainty of the date for restarting commercial flights”.
Cabin crew will be placed on the Government's emergency job retention scheme from April 1 for a two-month period and will be paid 80pc of their average salary.
Despite an initial rise, the airline’s shares are now down 8pc. Bloomberg reports that easyJet’s founder, Stelios Haji-Ioannou, has written a letter to all of its non-executive directors, telling them to argue that “force majeure” is an implied term in its £4.5bn order contract with Airbus, meaning its financial obligations to the plane manufacturer can be terminated.
Mr Haji-Ioannou said he will call for the removal of one non-executive director every seven weeks unless the contract with Airbus is terminated.
Bloomberg reports that the founder added easyJet will “need to end up with 100 fewer airplanes and hence fewer crews”, and said the company should raise equity rather than seeking a Government loan.

Hammerson shares drop to record low

Shares in shopping centre-owner Hammerson have plunged to a record low, after it scrapped its dividend and 2020 guidance.
The FTSE 250 group warned Covid-19 will have a “material impact” on its performance, adding that “conserving liquidity” was the best long-term focus for the group.
Hammerson said it has received 37pc of its UK rent billed for the second quarter, with two major destinations currently closed. It added:
It is too early to ascertain and quantify the impact of the ongoing period of disruption on income, earnings, net assets and cash flows, and as a result we are suspending all previous guidance.  We will continue to closely monitor the developing situation and update the market as appropriate.
Royal Bank of Canada’s Julian Livingston-Booth said Hammerson’s decision to suspend its dividend is in line with sector peers, warning that temporary agreements with its renants could put further pressure on rent collection rates. Stifel’s John Cahill said that the group may become a takeover target due to its deeply reduced price.

EY resigns as Finablr auditor


Finablr owns currency-exchange firm Travelex Credit:  Scott Eells/Bloomberg 
Auditor EY has thrown in the towel at payments firm Finablr, notifying the payments company of its resignation.
Finablr recently announced it was lining up insolvency advisors, as it faces a cash crisis and a financial scandal following the discovery of $100m  of secret finance deals,
As my colleague Michael O’Dwyer and I reported earlier this month:
The company’s struggles follow those of NMC Health, with which it shares a founder, BR Shetty, the Indian-born pharmacist whose stable of businesses spans from private hospitals to financial services.
NMC’s shares were suspended from trading just weeks before Finablr’s after it disclosed hundreds of millions of dollars worth of off-balance sheet financing arrangements.
With both firms now suspended, months of price instability have come to a juddering halt – but even if either buckles under current levels of pressure, questions will remain for the London market itself over whether there had been sufficient oversight.
Today, the group said:
In their letter of resignation, EY cited ‘concerns arising out of recent events at the company and NMC Health plc…the composition of the board of the company, the adequacy of corporate governance concerns and the recent issues that have caused the company to commission an independent review of the company's financial arrangements, including of related party transactions and on and off-balance-sheet debt’.
The group – which recently lost its spot in the FTSE 250 – said EY had made the continuance of its position as auditor contingent upon a “number of changes” to Finablr’s board, which the company was “unable to accommodate” in time. It added:
EY has not provided the board with any specific allegations or suspicions of wrongdoing, or of any actual or alleged instances of accounting, financial, governance or other irregularities.
Additionally, Finablr announced the resignation of two directors : non-executive director Abdulrahman Basaddiq and independent non-executive director Bassam Hage. In his resignation letter, Mr Basaddiq said he “had no knowledge concerning the matters which are the subject of an independent investigation, including the use of cheques”.
Mr Hage stepped down on Friday in line with a request from EY, which Finablr said was concerned that his previous role at EY could create a conflict of interests.
Finablr added (in a sign of some acrimony):
This view represented a change in EY's position since the point of Mr Hage’s appointment, at which time EY had confirmed that they were comfortable that Mr Hage's appointment as a Director did not have any such prejudicial impact on their independence as auditor.

FTSE falls

After a pretty flat opener, the FTSE 100 is now down about 1.8pc, with energy giants BP and Shell dragging down the blue-chip index as the price of oil slumps.

Rio Tinto: In-person attendance of AGM ‘no longer possible’

London-listed mining giant Rio Tinto has told shareholders that in-person attendance of its annual general meeting is no longer possible due to Covid-19, with investors instead asked to vote via proxy.
The FTSE 100 group said it is no longer “lawful” for it to hold the meeting – set to take place on April 8th – in the “normal way”, due to social distancing rules implemented by the Government:
Instead, the AGM will be convened with the minimum quorum of shareholders present in order to conduct the business of the meeting. The results of the poll votes on the proposed resolutions will be announced, in the normal way, as soon as practicable after the conclusion of the AGM.

Renault closes all plants outside of China and South Korea

Carmaker Groupe Renault has has announced that production at all of its plants – except those in China and South Korea – has halted as a result of coronavirus, It added:
The Group plans to restart production activities in the countries concerned as soon as conditions permit and will implement appropriate measures to respond effectively to commercial demand.

Heavy rain weighs on revenues for Pennon

Water group Pennon has said heavy rainfall over recent months has impacted its revenues, but said its 2019/20 performance remained in line with management expectations.
In a an update to the City, the FTSE 100 utilities company said it had performed well operationally despite “extreme wet and stormy weather” during recent months.
On Covid-19, it added:
Enhanced precautions and safety checks are in place and only essential customer visits are taking place, everything possible is being handled remotely. We know that this is a difficult time for our customers, and we have stepped up our support for those on our priority services register and customers that need extra support with their bills during this period.
Pennon said it is “well positioned” for any financial pressure, saying it has the funding and liquidity needed to pull through the “current uncertainty”.

Smith & Nephew withdraws guidance

Medical technology company Smith & Nephew has scrapped its guidance for the coming year, which had been predicated upon a normalisation of the coronavirus outbreak “early in the second quarter”.
The FTSE 100 group said:
Overall it is too early to determine the consequent impact of the COVID-19 pandemic on our business... It is difficult to determine how long the situation will last, the speed of normalisation thereafter, and the timing of catch-up of postponed procedures.
It said actions have been taken to make savings across its operations, including cutting down on travel, advertising, and hiring. The group said it has a “strong balance sheet with access to significant liquidity”.
Roland Diggelmann, its chief executive, said:
We are financially strong with a proven strategy and unique portfolio. Our major manufacturing and distribution facilities are all active and we are ready to meet pent-up demand when the time comes.

FTSE 100 opens flat

The FTSE 100 has opened more or less unchanged, up about 0.2pc at the time of going to pixel. EasyJet is up more than 3pc.

Smiths Group to produce 10,000 ventilators for Government


Demand for ventilators is soaring due to Covid-19 Credit: AXEL HEIMKEN/AFP
Engineering company Smiths Group has been contracted by the Government to produce 10,000 of its Smiths Medical paraPAC plus ventilators, in response to soaring demand prompted by the coronavirus outbreak.
The FTSE 100 group said production would “rapidly increase from hundreds a month to thousands a month”, with talks ongoing to increase its supply chain capacity.
Smiths added it is holding “urgent discussions” with “potential partners” from around the world to make its ventilator technology available to others.
Andrew Reynolds Smith, its chief executive, said:
I am proud of the tireless work that our people at Smiths and those working across this extraordinary consortium of British companies are doing to make a real difference.
The group’s announcement confirms our story from Sunday:

EasyJet grounds entire fleet


EasyJet said it could not offer any guidance on when flights will resume Credit: Simon Dawson/Bloomberg
Good morning, this is Louis taking over in London. I hope everyone had a good weekend!
Let’s get straight into it – easyJet has announced all its flights will be grounded from today for the foreseeable future as a result of travel restrictions prompted by Covid-19.
Though it will continue to operate some rescue flights where required, the FTSE 100 carrier said it has “fully grounded its entire fleet”, adding:
At this stage there can be no certainty of the date for restarting commercial flights.  We will continuously evaluate the situation based on regulations and demand, and will update the market when we have a view.
We continue to take every action to remove cost and non-critical expenditure from the business at every level in order to help mitigate the impact from the coronavirus.  The grounding of aircraft removes significant cost.
Following negotiations between management and Unite, the union, an agreement has been reached to furlough cabin crew at 80pc pay for two months from April 1.
Johan Lundgren, easyJet’s chief executive, said:
We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus.

Agenda: Stocks set to rise despite oil slump 

Good morning. European stocks are set to open the week in the green despite oil prices nearing record lows. 
Overnight, US crude prices fell below $20 a barrel as the virus-induced fall in demand creates a surplus in the market that risks overwhelming supply.
West Texas Intermediate or WTI, the US crude benchmark, hit a low of $19.92 a barrel, losing more than 6 per cent.
It came after the US warned that as many as 200,000 people in the country could die from Covid-19.

5 things to start your day 

1) 'Bolder' global rescue needed amid fears recession will last until 2021. Global leaders and central bankers need to 'urgently' step up efforts to rescue businesses, the head of BIS has said.
2) Beer subscription services toast ‘unprecedented’ demand. Small businesses have experienced a boom in sales as panic buying leaves supermarket shelves bare
3) Taxpayers to shoulder £6bn railway pensions black hole. Taxpayers risk being lumbered with an £8bn railway pensions black hole after the Govt stepped in to take control of the country’s trains.
4) Morrisons donates £10m worth of groceries to food banks. Food banks have seen donations dry up in the past fortnight as millions of shoppers stay at home.
5) Rolls-Royce faces cash crisis. The FTSE 100 firm is scrambling for cash as the collapse in air travel caused by coronavirus sees half of its revenues evaporate.

What happened overnight 

​Stocks in Asia pared some earlier losses but still traded lower as fears about the impact of coronavirus continued to grow.
Japan is reportedly closing its borders to citizens from the US, China and most of Europe as it moves to deal with a second wave of infections.
Oil prices also slumped to a 17-year low after the death toll from the pandemic surged past 30,000 at the weekend as cases in hard-hit Europe and the United States rocketed.

US futures up, Australian shares gain


Charging Bull Statue is seen lonely at the Financial District in New York City Credit: Anadolu Agency
US equity futures gained, reversing early losses, and Australian stocks climbed by a record as some investors took encouragement from strengthening policy stimulus.
It’s the first Monday in four weeks that futures on the S&P 500 Index haven’t gone limit-down in reaction to alarming weekend news. Still, the dollar snapped a four-session losing streak and equities were lower in most Asian markets as caution remains about the course of the coronavirus. Treasuries edged up along with the yen. Oil tumbled again, dropping past $20 a barrel in New York for a time.

Nikkei leads Asia lower, S&P 500 futures recoup early losses

Japan's Nikkei dropped 2.7% and Shanghai blue chips 1.8%. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.7%, though that was up from early lows.
E-Mini futures for the S&P 500 also recouped early losses to edge up 0.3%, perhaps thanks to month-end demand. EUROSTOXXX 50 futures firmed 0.5% and FTSE futures went flat.

Hong Kong stocks end morning down

Hong Kong stocks ended Monday's morning session more than one percent down.
The Hang Seng Index fell 1.29 percent, or 303.21 points to 23,181.07.

Indonesian trading halt triggered

Indonesian stocks plunged to a level that triggered trading halt, as the number of Covid-19 cases surge domestically and globally.
The Jakarta Composite Index dropped 5%, snapping a two-day winning streak and setting off a 30-minute trading halt. The benchmark gauge soared 15% in two days through Friday, the best gain since 1999 as investors bet that various measures to prop up the global economy will help prevent further downside in financial markets. Asian stocks ended a four-day advance to decline 1.8% as of 10:31 a.m. Jakarta time.

Main moves in markets


People walk by an electronic stock board of a securities firm in Tokyo on Monday Credit: AP
Stocks
  •  Japan’s Topix index fell 3.2% as of 9:01 a.m. in Tokyo
  •  Futures on the S&P 500 declined 1.3%. The S&P 500 fell 3.4% on Friday
  •  South Korea’s Kospi slid 2.6%
  •  Australia’s S&P/ASX 200 Index added 0.7%
Currencies
  •  The yen rose 0.4% to 107.51 per dollar
  •  The offshore yuan was steady at 7.0937 per dollar
  •  The rand lost about 1.5% to 17.88 per dollar
  • The Aussie slipped 0.1% to 61.72 U.S. cents
Bonds
  • The yield on 10-year Treasuries dipped two basis points to 0.66%
Commodities
  • West Texas Intermediate crude was down 5% to $20.44 a barrel
  •  Gold dipped 0.1% to $1,627.52 an ounce

Hong Kong shares start on back foot

Hong Kong stocks opened with losses on Monday morning as the euphoria from last week's massive US stimulus and easing measures gave way to ongoing worries about the rapidly spreading coronavirus.
The Hang Seng Index fell 1.97 percent, or 463.43 points, to 23,020.85.
The benchmark Shanghai Composite Index fell 1.63 percent, or 45.15 points, to 2,727.05 and the Shenzhen Composite Index on China's second exchange slipped 1.95 percent, or 32.99 points, to 1,660.35.

Oil prices slump


Oil prices slump on coronavirus fears Credit: Reuters
Oil prices slumped in Asian trade on Monday, tracking falls on stock markets after a sharp escalation in the coronavirus crisis over the weekend.
US benchmark West Texas Intermediate fell 3.9 percent to trade at $20 a barrel, while international benchmark Brent crude was off 4.9 percent at $23 a barrel.

Singapore’s Central Bank takes easing action

Singapore’s central bank took unprecedented easing steps on Monday to support an economy on track for its worst recession in years due to the rapid global spread of the coronavirus.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than a benchmark interest rate, recentered the currency band downwards and reduced the slope to zero.
The Singapore dollar rose as much as 0.4% to 1.4216 against the US dollar following the MAS announcement.

Tokyo stocks fall more than 3 percent at open

Tokyo stocks opened down more than three percent Monday, as traders fret about the spreading coronavirus with a higher yen against the dollar also weighing on the market.
The benchmark Nikkei 225 was down 3.26 percent or 631.50 points at 18,757.93 in early trade, while the broader Topix index dropped 3.17 percent or 46.30 points to 1,413.19.
The dollar fetched 107.55 yen in early Asian trade, against 107.88 yen in New York on Friday.
"Japanese shares are seen dominated by profit-taking sales following falls in US shares with the trend of a higher yen," Okasan Online Securities chief strategist Yoshihiro Ito said in a commentary.
On Wall Street, the Dow ended down 4.1 percent at 21,636.78.

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