London close: Stocks finish higher as BoE hints at further asset purchases
London stocks turned around to finish higher in afternoon trading on Thursday, as investors digested the latest scheduled announcement from the Bank of England and record US initial jobless claims numbers.
The FTSE 100 ended the session up 2.24% at 5,815.73, and the FTSE 250 was 3.78% higher at 15,380.71.
Sterling was sharply stronger against both of its major trading pairs, rising 2.18% against the dollar to last trade at $1.2137, and was 0.92% firmer on the euro at €1.1016.
The number of Americans filing for unemployment benefits surged to a record 3.28 million last week as businesses shut down and people were let go due to the coronavirus.
According to the Labor Department, jobless claims rose a whopping 3m from the previous week’s level, which was revised up by 1,000 to 282,000.
It marked the highest level of seasonally-adjusted initial claims in the history of the series.
The previous high was 695,000 in October 1982, while economists had been expecting a 1.5m increase.
Paul Ashworth, chief US economist at Capital Economics, said the unprecedented surge in initial jobless claims starkly illustrates the extent of the economic devastation that the coronavirus has unleashed.
"To put that in perspective, claims have never exceeded 700,000 in a single week before.
"Furthermore, there are good reasons to believe that understandable constraints on the capacity of offices to process claims mean that the true picture of layoffs is even worse.
“The state breakdown of these figures imply that claims in California were slightly less than 200,000 last week, whereas the latest information we have is that claims there have now reached 1,000,000.”
Ashworth noted that Pennsylvania was by far the worst affected state according to the breakdown, with nearly 400,000 claims last week.
On home shores, the Bank of England warned on Thursday that a "sharp" contraction in economic activity around the globe was likely, alongside a "rapid" rise in unemployment across many economies.
It also said there was a risk of longer-term damage to the economy "especially if there are business failures on a large scale or significant increases in unemployment."
Furthermore, financial conditions both in Britain and overseas had tightened "materially".
Hence, while the Bank Rate was kept at 0.1%, as expected by economists, policymakers kept the door open to a further ramp up in asset purchases.
“The MPC will continue to monitor the situation closely and, consistent with its remit, stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy," it said in a summary of its policy decision.
"There is little evidence as yet to assess the precise magnitude of the economic shock from Covid-19."
Earlier, data from the Office for National Statistics showed the UK high street was already flagging in February, as heavy rain and widespread flooding kept people out of shops.
The quantity bought in retail sales fell for the fourth consecutive month by 0.6% in the three months to February.
According to the ONS, monthly growth rate fell 0.3%, compared to growth of 1.1% in January. The month-on-month figure came in below consensus - most economists had been looking for growth of around 0.2%.
Year-on-year, February 2020 was flat, the lowest growth since March 2013, when it fell 1.6%.
The coronavirus outbreak has in recent weeks seen a spike in retail sales, especially in grocery, as consumers rush to stockpile food and household goods.
However, stockpiling did not start in earnest until March, and instead, the weak performance was attributed to unseasonably bad weather and some disruption to supply chains.
“Retail sales continued to decline in the latest three months, due to weak sales across most store types, with February’s bad weather and flooding impacting on footfall,” said Rhian Murphy, head of retail sales.
“A small number of retailers also said that the impact of the coronavirus had affected sales of goods shipped from China.”
On the corporate front, the Covid-19 updates kept rolling in.
Electrical retailer Dixons Carphone was up 12.47% after reporting a 24% fall in like-for-like sales growth in the UK in the three weeks to March 21, as it pulled guidance and placed its final dividend on review as the coronavirus pandemic hit trading.
British Land was off 1.64% after it cancelled its dividend, waived £3m of rents from smaller tenants and halted work at big developments in response to the Covid-19 crisis.
Capital & Counties was 2.94% firmer after it announced it was temporarily suspending its share buyback programme and will defer some rental payments due to the outbreak, as it said it is still is too early to assess the impact.
Self-storage company Big Yellow managed gains of 0.16% as it said it was considering a number of initiatives to conserve cash in the short term due to the coronavirus, that it will agree rent holidays or deferrals for some customers, and that a decision about its final dividend will be made "in due course".
Weir Group was up 1.11% after it said it was scrapping its dividend and cutting costs to withstand declining demand caused by the crisis.
FTSE 100 - Risers
Rentokil Initial (RTO) 399.50p 17.47%
Legal & General Group (LGEN) 215.60p 14.89%
Standard Life Aberdeen (SLA) 258.00p 14.62%
Meggitt (MGGT) 331.00p 11.34%
Compass Group (CPG) 1,242.00p 10.99%
InterContinental Hotels Group (IHG) 3,799.50p 10.77%
Auto Trader Group (AUTO) 437.50p 10.70%
Ashtead Group (AHT) 1,815.50p 10.60%
Carnival (CCL) 1,235.00p 10.27%
ITV (ITV) 72.08p 9.68%
FTSE 100 - Fallers
M&G (MNG) 140.60p -6.58%
British Land Company (BLND) 351.10p -4.72%
Centrica (CNA) 42.55p -3.25%
Royal Bank of Scotland Group (RBS) 132.50p -3.11%
BHP Group (BHP) 1,275.40p -3.09%
Royal Dutch Shell 'B' (RDSB) 1,374.00p -3.06%
Royal Dutch Shell 'A' (RDSA) 1,414.20p -2.94%
HSBC Holdings (HSBA) 497.90p -2.35%
Land Securities Group (LAND) 586.60p -2.30%
Johnson Matthey (JMAT) 1,889.50p -2.20%
FTSE 250 - Risers
Bakkavor Group (BAKK) 107.40p 43.01%
McCarthy & Stone (MCS) 73.60p 29.58%
National Express Group (NEX) 208.60p 19.27%
Mitchells & Butlers (MAB) 198.20p 18.97%
Greencore Group (GNC) 187.75p 15.93%
Provident Financial (PFG) 253.30p 15.93%
TP ICAP (TCAP) 353.80p 15.32%
TUI AG Reg Shs (DI) (TUI) 404.60p 14.29%
Just Group (JUST) 58.50p 13.59%
Sanne Group (SNN) 613.00p 13.52%
FTSE 250 - Fallers
Virgin Money UK (VMUK) 67.94p -7.99%
Biffa (BIFF) 188.80p -6.53%
Aston Martin Lagonda Global Holdings (AML) 270.00p -5.59%
Apax Global Alpha Limited (APAX) 121.00p -5.47%
Stagecoach Group (SGC) 79.55p -4.55%
Clarkson (CKN) 2,255.00p -4.45%
Ferrexpo (FXPO) 119.40p -3.94%
Beazley (BEZ) 386.60p -3.83%
Kainos Group (KNOS) 622.00p -3.72%
Games Workshop Group (GAW) 4,462.00p -3.25%