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Thursday update

DB Live: US markets plunge; construction restart; retail plan

10pm: US markets plunge

Traders on Wall St (pic: NYSE)

Wall Street plunged as investors reacted to renewed fears of a second wave of coronavirus and fretted over dour economic forecasts from the US Federal Reserve.

All three of the top stock indexes lost more than 5%, posting their worst one-day percentage drops since 16 March, when markets were sent into freefall by worldwide lockdowns. The Nasdaq snapped a three-day streak of record closing highs.

The Dow Jones Industrial Average fell 1,861.82 points, or 6.9%, the S&P 188.04 points, or 5.89%, and the tech-heavy Nasdaq Composite dropped 527.62 points, or 5.27%.

5.30pm: All shops in NI to reopen

The Northern Ireland Executive has today changed tack on shops in shopping centres/malls and will now allow all shops including those in shopping centres/malls to re-open tomorrow (Friday). Shops in England can re-open on Monday, but remain closed in Scotland with no date for reopening.

Nicola Sturgeon, First Minister, today said she would announce the Scottish government’s plans for retail next Thursday (see below).

David Lonsdale, director of the Scottish Retail Consortium, said: “Retailers in Northern Ireland and England are in the enviable position of being able to re-open or knowing they can from the start of next week.

“By contrast shopkeepers in Scotland remain in the dark and don’t have an indicative let alone a firm timetable to work towards.”

“Shops have been working hard to get ready to open safely, putting in place the necessary social distancing and hygiene measures to protect customers and staff, using the SRC-Usdaw guide published in April and the Scottish Government’s retail guidance published last month.”

4.45pm: London closes sharply lower

Stocks in London suffered a sobering session as investors absorbed comments from the Federal Reserve on the outlook for the world’s largest economy and a rise in new coronavirus cases in the US.

The Fed chairman Jerome Powell stated the US economy would take time to fully recover from the pandemic, forecasting a 6.5% contraction this year and unemployment of 9.3%.

The FTSE 100 index closed down 252.43 points or 4% at 6,076.70. The FTSE 250 ended down 631.79 points, or 3.6% at 16,973.67, and the AIM All-Share closed down 21.61 points, or 2.4% at 865.61.

2pm: Lloyds fined

Lloyds Banking Group has been fined £64m by the financial industry regulator for its treatment of mortgage customers in difficulty.

The fine relates to a lack of support for mortgage customers in arrears between 2011 and 2015.

The bank knew about some of the problems in 2011 but failed to adequately solve them, said the Financial Conduct Authority.

About 526,000 customers have received a share of £300m in compensation.

1.30pm: Retail restart to be outlined next week

Nicola Sturgeon, First Minister, said she would outline the government’s plans for restarting retail operations when she reviews the lockdown measures next Thursday.

Following the decision to restart tourism on 15 July she was asked to distinguish between tourism businesses which are also retailers, such as gift and souvenir shops, and other retailers which may sell the same items.

“Of course, there is overlap,” she said.. “I hope to say more about retail next Thursday.”

12.35pm: Construction sites prepare to return

Advance Construction

First Minister Nicola Sturgeon announced that the construction sector can move to the next stage of restarting work at Scottish sites from next Monday. However, she stressed that “we have a long way to go before the sector is working at full capacity.”

She also announced that the Help to Buy scheme, which has helped 17,000 people buy a home, will be extended to March 2022.

9.30am: Shoppers change habits

One in four shoppers say they will never return to visiting stores in the same way as they did before lockdown, says a survey by Edinburgh online scheduling company Appointedd.

Full story here

8.40am Centrica to cut 5,000 jobs

Centrica, the owner of Scottish and British Gas, is to cut 5,000 jobs as it looks to reduce costs.

Full story here

8.30am: London opens lower

London turned lower amid fears of a second wave of COVID-19 infections in the US and a gloomy outlook by the Federal Reserve.

The Fed projected the US economy to shrink 6.5% in 2020 and said the economy faced a long road back from the pandemic.

FTSE 100 index was 138 points (2.18%) lower at 6191 at 8.30am, with oil & gas stocks leading declines with a 4% tumble.

7am: Just Eat gobbles up US peer

Just Eat Takeaway (JET) is acquiring US peer GrubHub in an all-shares deal valued at $7.3bn.

JET said in a statement: “A combined Just Eat Takeaway.com and Grubhub will become the world’s largest online food delivery company outside of China, with strong brands connecting restaurant partners with their customers in 25 countries.” 

Heathrow can no longer protect jobs

Heathrow

Heathrow Airport CEO John Holland-Kaye took a swipe at the government’s quarantine scheme and said that protecting jobs is no longer sustainable. It has begun the process of voluntary severance.

Britain’s biggest airport saw passenger numbers in May at an all-time low (down 97% on the same time last year) and said the “grim picture” would continue, “thanks to the Government’s quarantine policy” which requires all arriving passengers to self-isolate for two weeks.

The airport is restructuring its frontline roles, having already cut a third of managerial roles.

Heathrow is urging the Government to establish ‘air bridges’ to low risk countries that will enable the country to restart its economy in earnest, protecting livelihoods in aviation and the sectors that rely on it.

The aviation industry is calling for a 12-months waiver in business rates for all airports in England and Wales, matching the support given to Scottish and Northern Irish airports and the UK’s hospitality and leisure sector.

Despite an increase in cargo only aircraft, overall cargo tonnage has decreased by 40% as the bulk of cargo usually travels in the belly hold of passenger planes.

Last month, Heathrow began trialling thermal screening technology in the immigration hall of Terminal 2 and the check in area in Terminal 5. These trials are part of a wider programme looking at how technology could reduce the risk of contracting or transmitting COVID-19 when travelling and in future could help create a Common International Standard for health screening.

Mr Holland-Kaye, said: “Throughout this crisis, we have tried to protect front line jobs, but this is no longer sustainable, and we have now agreed a voluntary severance scheme with our union partners. While we cannot rule out further job reductions, we will continue to explore options to minimise the number of job losses.”

Babcock

Archie Bethel, chief executive of the engineering giant, saw strong performances across the marine, nuclear and land sectors and has taken action to address weaknesses in aviation, including writing down goodwill to reflect its updated expectations of the oil and gas market.

The early impact of the global COVID-19 pandemic had a limited impact on the group in the last financial year “but is creating uncertainty as we head into this new financial year.”

Mr Bethel said: “We pride ourselves on the fact that we support customers responsible for providing critical services: our work in defence and aerial emergency services saves lives, supports national defence and protects communities.

“I am also extremely grateful to HM Government and in particular the Cabinet Office and Ministry of Defence who acted quickly and decisively to ensure that contracts continue to be funded and that cash flowed effectively through the main suppliers and down into the supply chain.”.

The majority of the company’s work has been declared to be critical and its people designated as key workers. All major sites have remained open.

The board has deferred the decision on its final dividend until there is greater certainty on the impact COVID-19 will have on the business and stakeholders.

Underlying operating profit for the year to the end of March fell from £588.4 million to £524.2m.

Mr Bethel announced in February that he would be retiring after 16 years as chief executive. A search for his successor continues.

6.50am: Market called lower

The FTSE 100 is set to open sharply lower as economic projections from the US Federal Reserve gave a reality check to recent rallies.

The blue-chip benchmark is called 118 points lower with CFD and spreadbetting firm IG Markets making the price at 6,200 to 6,203.

Wall Street stocks turned negative last night. The Dow Jones shed 282 points or 1.04% while the S&P 500 dipped 0.5%. The Nasdaq, which has hit new highs, was more robust, rising 0.6%.

It came as the Fed reported forecasts of a 6.5% contraction in the US economy this year. According to the Fed, the unemployment rate in the US will be about 9.3% at the end of 2020 before reducing to 6.5% in 2021 and 5.5% in 2022 and 4.1% in 2022.

Fed chair Jerome Powell said it will be “a long road” to economic recovery following the pandemic.

Today’s top Daily Business headlines

Hotels in jobs threat as tourism gets restart date

Former Treasury adviser to take helm at CBI

Aberdeenshire estate sold in £11m deal



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