Friday, April 24: FTSE 100(-1.28%) slipped lower at the open, with a slew of industrial, chemical and airline stocks weighing on the index alongside weak retail sales & consumer confidence data. Losses in major indices were accelerated across Europe as investors were disappointed by the lack of granularity in a trillion-euro emergency fund from Europe’s heads of state, especially in light of deteriorating economic data. A €500m rescue package was agreed upon, but the minutiae of the proposed larger stimulus will not become apparent until Summer.
UK consumer confidence held at its lowest levels since 2009 this month, after capitulating in the later stages of March, as the country remained in coronavirus lockdown and on track for a deep recession. Gfk noted its consumer confidence index held at -34 during the first half of April, unchanged from the latter half of March, but steeply lower with respect to the -9 recorded earlier that month. The survey took in responses from 2,000 people on behalf of the European Commission.
Meggitt(-4.24%) led the FTSE 100 lower at the open following broker downgrades from Soc Gen and Berenberg. The former put out a bearish note on aerospace & defence stocks which also impacted peer Melrose(-2.83%). Meggitt’s trading update alluded to a single-digit rise in revenues for Q1, though did note softening markets in the civil aerospace division. Revenue for the three months to March end was 5% higher on an organic basis, with growth in defence unable to offset softer trading in civil aerospace & energy. A decline in activity is expected across both original equipment and after market within civil aerospace, as customers adapt and scale back activities to reflect the global reduction in air traffic. In mitigation, furlough schemes will be used and 15% of Meggitt’s workforce has already been cut. The Group also enacted a freeze on all new hiring and removal of annual salary increases for all employees. In addition, the CEO, CFO, non-executives and executive committee members will take a 20% salary cut, the FY19 dividend was cancelled last month, and discretionary capital expenditure has also been shelved. Due to the fast-moving nature of end markets and the global macro picture, the Board were reluctant to provide forward looking guidance at this current time.