Closing summary: Second day of gains as US stimulus plan bolsters hopes
Equity markets have risen in Europe and the US as investors await details of the $2tn stimulus agreed by Congress in Washington.
Here are some of the highlights of the day:
- The FTSE 100 gained 4.45% today to close at 5,688.20 points. That makes it the 19th best day in the FTSE 100’s history (back to 1984), after its second best day ever.
- Wall Street is on track for another day of strong gains, with the S&P 500 up by 4% and the Dow Jones industrial average up by 5.5%.
- Regulators and politicians warned Britain’s banks not to let viable businesses fail because of the coronavirus crisis.
- JD Wetherspoon has told its suppliers it will not pay them until pubs reopen after the coronavirus lockdown, in a move that risks adding to a backlash against its behaviour during the crisis.
You can keep following our coronavirus coverage around the world.
In the UK, Boris Johnson says 405,000 people have signed up to be NHS volunteers
In the US, the New York governor warns parks could be closed if social distancing is ignored
And in our global coverage, the death toll in Spain has passed China, as global numbers approach 20,000
Thanks for reading, and do join us tomorrow for more live coverage of economics, markets and business. JJ
Boris Johnson is doing his daily briefing on the coronavirus response.
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Markets have sold the rumour and bought the fact when it comes to recession warnings. With heavy falls behind when the toll of the virus became clear, investors are already looking forward to efforts to pull the economy out of the doldrums.
Yet the effects of the coronavirus outbreak are still in their early stages, as evidenced by the surge in the number of claimants of universal credit, the UK’s benefits system. There was a 477,000 increase in new claims over the past nine day, according to Peter Schofield, a civil servant at the Department for Work and Pensions - 500% higher than the same period last year.
That means the UK is suffering the early stages of an unemployment crisis, said the Resolution Foundation, a think tank whose ideas for paying workers’ wages heavily influenced government policy.
The number of new claims to universal credit in the past nine days is greater than the successful claims made to jobseeker’s allowance in any entire month during the financial crisis.
Karl Handscomb, senior economist at the Resolution Foundation, said:
The unprecedented surge in new Universal Credit claims shows that the UK is already in the midst of an unemployment crisis.
The increase in claims is putting huge pressure on our social security system, and is driven by a huge hit to family incomes.
The government was right to increase the generosity of the benefits system last week. It now needs to ensure the resources are there so that claims are processed quickly, and people receive support as soon as possible.
It was the 13th best day ever for the FTSE 250 index of mid-cap companies.
The FTSE 250 gained 4.57% to reach 14,819.91 points.
FTSE 100 rallies to post 4.5% gain as US stimulus brightens mood
And there is the closing rush on the FTSE 100 again: it gained 4.45% today to close at 5,688.20 points.
That makes it the 19th best day in the FTSE 100’s history (back to 1984). And that comes off the back of its second best day ever. These are quite extraordinary times.
US stocks are also gaining momentum, with a 5% increase on the Dow Jones industrial average and 3% on the S&P 500.
All of the positive energy in global stock markets is being driven by the deal in the US to inject a $2tn fiscal stimulus into the economy.
Lloyds, Britain’s biggest high street bank, has granted mortgage holidays to more than 70,000 customers in a little over a week.
That’s one of the first tallies we’ve seen since the chancellor announced that homeowners who came into financial trouble as a result of the outbreak would be given up to three months’ relief on their payments.
Lloyds has also confirmed some new emergency measures for personal banking customers - waiving interest on arranged overdrafts of up to ￡300 for all customers across its Lloyds, Halifax and Bank of Scotland branches from 6 April.
It follows similar announcements by Barclays this morning.
Markets have now closed in Europe for the day, and it looks like there was another late buying spree.
The FTSE 100’s preliminary close shows it pushed to a 3.5% gain for the day, to break through 5,600 points - let’s see if the closing auction can push it higher, as it did dramatically yesterday.
The Stoxx 600 gained 2.5% in preliminary data.
More forecasts of recession for major economies: Moody’s now predicts GDP will fall by 0.5% in the G20 economies in 2020, followed by a pick-up to 3.2% growth in 2021.
In November last year, before the emergence of the coronavirus, the agency was expecting G20 economies to grow by 2.6% in 2020.
In the UK GDP is expected to fall by 2.6%, compared to the (historically weak) 1.2% expansion seen in 2019. Moody’s said:
The G20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021.
JCB is suspending UK production until at least the end of April as a result of the coronavirus crisis, the company announced today.
Workers will still be paid under the government’s scheme to pay 80% of the salaries of furloughed employees. Senior JCB directors will not be taking a salary “until further notice”.
The firm’s nine manufacturing plants in Staffordshire, Derbyshire and Wrexham have been closed since 18 March.
JCB CEO Graeme Macdonald said:
These are certainly unprecedented times and none of us expected to find ourselves in this situation. In announcing that all those JCB colleagues asked not to work will receive 80% of their pay, we hope to remove any financial concerns that many people will undoubtedly have had.
The Wall Street rally has picked up again: the Dow Jones industrial average has gained 3.2%.
It looks like it is Boeing that is driving the market. The plane maker is truly a stock market giant, and its shares are up by a whopping 33% today - although still only reaching levels last seen on 13 March.
Boeing has asked for a $60bn bailout for aerospace manufacturers. The company, which is one of the most successful lobbyers of the US government, is already struggling under the weight of the 737 Max safety crisis.
The S&P 500, a broader gauge less likely to be swayed by a single name, is only up by 1.3%.
Choppy trading on the currency markets. Sterling lost another half a cent against the US dollar in the space of a few minutes, before roaring back to trade flat at the time of writing.
One pound will now buy $1.1765 - that’s a fall of only 0.01% today. It’s down by 0.44% against the euro today as well to trade at €1.0857.
Even with the swings in fortune today, it has been a brutal run in recent times for the pound. Indeed, sterling fell to its lowest level on record against the currencies of Britain’s major trading partners earlier this week, points out Nigel Green, chief executive and founder of deVere Group, a financial advisor.
The Bank of England’s sterling effective exchange rate index (ERI) fell to a reading of 73.2 on Tuesday (compared to 100 in January 2005), as this slightly homemade chart going back to 1990 shows:
These are unprecedented times. The pound is weaker now than at any point during the Brexit process, the 2008 financial crash, or 1992’s Black Wednesday when speculators forced the government’s hand in pulling the pound from the European Exchange Rate Mechanism.
First, the coronavirus pandemic has triggered a flight-to-safety. As is typical in times of economic turbulence, the US dollar attracts more buyers, in turn pulling down the price of sterling.
Second, investors are seeking liquidity and the most liquid assets of all are US Treasuries, which explains why dollars are always in demand.
Third, before the pandemic, many investors had piled into sterling anticipating more gains following a decisive general election outcome.