Lifting Restrictions Lifts Markets


Tuesday, 28 April: Markets jumped at the open as investors sourced optimism from early signs of global lockdown restrictions being lifted. The gentle and slow restart of the global economic engines has brought some hope to investors, which led Asian bourses higher for the second day in a row. The Nikkei closed 2.7% higher and the Hang Seng was +1.2%. The FTSE managed to extend gains through the session, despite Wall St. flagging towards our close. The main index in London closed 1.9% higher with the FTSE 250 closing 2.1% higher.

In London among the main headlines today including those firms kicking off earnings season, including HSBC and BP. Interesting HSBC has announced a delay to the planned 35,000 job cuts as part of a wider global cost-cutting plan, announced prior to the current coronavirus pandemic. The move being motivated by the bank looking to cover for the fact that it will be very hard for staff to find new employment at this time. Rare compassion from large institutions in such harsh times. Shares in the bank climbed 1% during today’s session despite the fact pretax profits have declined 50% during the first quarter. Bad loans will rise to around $3bn and they have confirmed numerous executive-level pay cuts.

The low oil prices around the world have been one of the very few things to steal headlines away from COVID-19. Today BP reported earnings which was joined by a report that fears the UK North Sea oil & gas sector could lose a fifth of all jobs. The cripplingly low oil price from oversupply and a drop in demand looks to have a longer recovery horizon that the current pandemic, offering little hope for the sector at the current time. Despite a desperate decision to cut global supply by 10% recently this is seen as far too little as well as fairly late now. Returning to BP, the oil giant has showed that Q1 profits have dived two thirds. Shares have climbed 2.6% today, perhaps with many clutching to hope they will still pay the dividend. Management have expressed their desire to do this but other factors may force their hand. Longer term, the threat is that oil companies will fail to become ‘carbon neutral’ in the timescale they have set out as this is fairly impossible at the current price level of oil itself.

Dave Lewis, Tesco CEO, has said customers are shopping the way they used to. With less trips to the supermarkets but they have seen the average size of baskets double. This comes as social distancing makes it harder and less appealing to just do small frequent shops, and given the fact many are working from home we have more time for food rather than grabbing meal deals and planning one day in advance like many were accustomed to. Tesco for the first time passed 1,000,000 online delivery slots in a week for the first time, with Lewis aiming to grow this by a further 200,000 slots over the coming 10 days. Online growth has been over 100% in the last few weeks, before the crisis only c.7% of groceries were purchased online. Tesco shares closed 0.4% higher.

Winners on the day included Lloyds and JD Sports, with Cineworld top climber on the FTSE 250. Games Workshop (+9%) was also one of the index’s best performers of the day as they were given a boost from the gentle reopening of some stores across mainland Europe and China, as well as making trade sales online from the start of May.

As we sign off US markets have slipped lower, with many investors deciding to dump numerous tech giant shares before earnings begin to be reported. Alphabet, Microsoft and Facebook all report within the next couple of sessions, with Amazon and Apple also later in the week. Brent oil was just below $20 p/bbl as WTI Crude dropped further to c.$12.19 p/bbl.

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