UK and US retail sales plunge and US manufacturing suffers biggest decline since 1946

Markets have opened firmer this morning, led by travel stocks, after their dismal showing yesterday. This has been driven by some optimism from two of Europe’s largest budget airlines. easyJet is up over 6% after reassuring investors it has the reserves to last out the grounding of flights. Ryanair is up over 3% after saying it was well placed to cope with the possible price war when movement restrictions are lifted and competition heats up as people look to get away post-lockdown.

In the UK, the British Retail Council announced that retail spending had fallen by a quarter in the first two weeks of lockdown in Britain. Compared to the five weeks to April 4 2019, sales were down 4.3%, the biggest monthly fall since 1995.

Across the pond it was a similar story as US retail sales also suffered a record breaking drop, sinking 8.7% in March — the largest fall since the data series started in 1992. With most Americans impacted by orders to stay at home, the drop in sales caused by the restrictions was well beyond the uptick in online orders. The downbeat data did not end here as manufacturing output charted its biggest decline since 1946, slumping 6.3% in March — around double economists’ prediction. Manufacturing represents 11% of the US economy, and has been decimated by disruptions to supply chains globally and a reduction in demand for everything from motor vehicle parts to oil drilling machinery.

Fashion brands tumble amid rumblings of JCPenney bankruptcy

Investors met results posted by Bank of America (BofA) and Goldman Sachs with two very different responses on Wednesday. While both firms posted year-over-year profit declines of around 45% in Q1, and set aside billions in provisions for loan losses, the more investment banking dependent Goldman enjoyed a 28% jump in trading revenue. BofA’s share price fell 6.5% on Wednesday, while Goldman Sachs stock was flat.

In other corporate news, Apple introduced the new iPhone SE, priced at $399 — which will be available for preorder on Friday. Apple’s share price fell 0.9% following the news. All three major US stock indices fell on the day, with the S&P 500 down furthest at a 2.2% loss. Clothing brands and retailers were among the worst performers. PVH, the firm behind brands including Tommy Hilfiger and Calvin Klein and L Brands both fell double digits, while Nordstrom and Ralph Lauren both sank by more than 9%. The poor showing from the sector came amid rumblings that retailer JCPenney may be about to go bankrupt, after missing a $12m debt payment on Wednesday. The company’s stock sank 27.3% on the news, having already lost three quarters of its value in 2020.

S&P 500: -2.2% Wednesday, -13.9% YTD

Dow Jones Industrial Average: -1.9% Wednesday, -17.6% YTD

Nasdaq Composite: -1.4% Wednesday, -6.5% YTD

OBR forecasts UK economy will shrink by a third in Q2

London-listed shares slumped on Wednesday after the Office for Budget Responsibility (OBR) said late on Tuesday that the British economy could shrink by 35% in Q2 2020, and 13% for the year.

The FTSE 100 fell by 3.3%, with only seven stocks posting a positive day, including Ocado, Sainsbury’s and United Utilities. At the bottom of the index, turnaround specialist Melrose Industries was the only double digit faller, with easyJet, RBS and JD Sports Fashion all sinking by more than 8%.

In the FTSE 250, which was down 4.6%, pub chain JD Wetherspoon was one of the biggest losers with a 14% loss, after analysts warned that the firm may be forced to turn to its investors for funding in order to survive the coronavirus pandemic. Cineworld was the worst performer in the FTSE 250, however, falling 21.2% as cinema chains face an uncertain financial future with US chain AMC Entertainment reportedly in the early stages of considering bankruptcy.

FTSE 100: -3.3% Wednesday, -25.8% YTD

FTSE 250: -4.6% Wednesday, -30% YTD

What to watch

Abbott Laboratories: Medical giant Abbott Laboratories announced this week that it is launching its third coronavirus test, and that it could be screening up to 20 million people for Covid-19 antibodies by June. While its previous two tests can show whether a person currently has the disease, the new test will show if a person has been infected previously. The firm reports its latest set of quarterly earnings on Thursday, after its stock popped by 2% yesterday following the new test announcement. Abbott’s share price is up 4.7% year-to-date. On Thursday, analysts are certain to probe what financial benefit the firm is deriving from its involvement in the coronavirus response. Currently, Wall Street analysts lean in favour of a buy rating on the stock, with 14 buy ratings, two overweights and five holds, and no sell ratings.

Banking and investment names: Thursday is another busy day on the earnings calendar for financial stocks, with banking giants Morgan Stanley and BNY reporting, plus BlackRock, the world’s largest asset manager. Morgan Stanley will be one of the highlights, given that it announced in February it is acquiring online broker E*Trade for $13bn in an all-stock deal. The challenge of pulling off the integration of E*Trade, which is known for the sophistication of its technology, while managing costs during a period where revenues are down in banking, asset and wealth management (all markets Morgan Stanley operates in), will be front and center.

Initial jobless claims: The running total of the past three weeks of initial jobless claims is more than 17 million, following two consecutive weeks where more than six million Americans signed up for unemployment benefits. Economists are anticipating another week where the total is over five million, and that this week’s figure will mean that all of the jobs created in the US since the global financial crisis will have been erased — albeit a chunk of those only temporarily.

Crypto corner:

Bitcoin is back over the $7,000 mark this morning as cryptoassets in general bounce following yesterday’s slump. Data has shown that more investors are holding bitcoin ahead of the halving as the balance held on exchanges falls to the lowest level since last June and is down 8% from the year-high reached back in January. Those who are bullish on the halving expect the price to be boosted by fewer new coins entering the ecosystem as mining rewards halve and, as such, supply will drop due to the lower incentive on offer.

Elsewhere, China is set to launch its national blockchain platform on April 25th. The Blockchain Services Network (BSN) will enable companies to deploy blockchain faster and in a more cost effective manner. It is hoped that this will encourage some smaller and medium sized businesses, who might have initially been put off by the high costs of entry, to innovate in the space.


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