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Thursday Update

DB Live: Bank stimulus; new car sales fall; Sainsbury’s loss

REFRESH FOR UPDATES THROUGHOUT THE DAY

4.30pm: FTSE 100 remains in positive territory

Election uncertainty hung over the markets though investors were happy to buy stocks on the back on more bond-buying by the Bank of England and pushed the FTSE 100 22.92 points (0.39%) higher to close at 5,906.18.

Car showroom Perth

9am: New car registrations fall

New car registrations in October fell -1.6% year on year to 140,945 units, a nine-year low.

It was weakest October since 2011 and 11% lower than the average recorded over the last decade.

The overall UK market was hit by the firebreak lockdown in Wales on 23 October, which saw it recording 25.5% fewer registrations by the end of the month. This accounted for more than half of the overall UK decline.

The lockdown in England will impact on sales through showrooms though the continuation of click & collect and delivery services should help prevent a repeat of the sales wipe-out experienced in the spring.

Mike Hawes, SMMT chief executive, said, “When showrooms shut, demand drops, so there is a real danger that with England today entering a second lockdown, both dealers and manufacturers could face temporary closure.

October saw a 38.4% decline in diesel sales while petrol sales were down 21.3%. Battery Electric Vehicles saw a 195% increase, Plug in hybrid electric vehicles saw a 148.7% boost while hybrid electric vehicles rose 39%. 

8.15am: London edges higher

The FTSE 100 made a cautious start, up just under 10 points higher at 5,893.10.

Bank of England

7am: Bank injects new funds

The Bank of England will inject an extra £150 billion into the economy as the government tackles the impact of the coronavirus on the economy.

Its monetary policy committee left interest rates on hold at a record low of 0.1%.

The Bank is now forecasting an 11% drop in GDP in the last three months of this year. It then projects growth through next year, reaching pre-COVID levels by the end of the year.

Alpesh Paleja, CBI lead economist, said:  “Further asset purchases once again illustrate the Bank’s willingness to go above and beyond to support activity. With an increasingly murky economic outlook ahead, a further loosening of monetary policy will give reassurance to the business community. 

“But monetary policy can only do so much, and as restrictions on activity tighten amid rising infection rates, sectors that remain under pressure may very well need further support. 

“In the meantime, there are five clear steps that are needed to help the economy weather the winter storm. We need to keep covid-secure firms as open as possible, provide assurances that the government’s financial and employment support will last the course, put in place a transparent exit plan for lifting lockdown, roll out mass testing without delay, and involve business in decision-making.”   

Laith Khalaf, financial analyst, AJ Bell said: “The Bank is beginning to run out of dry powder as it now holds almost half the gilt market. and interest rates are already close to zero. That means if the central bank wants to boost the economy further, it may resort to even more extraordinary measures than we have today.

“Negative interest rates are certainly on the table. The Bank is seriously weighing this up and has written to bank chiefs to see if they can handle it. QE could also shift towards different assets, such as more corporate bonds, high yield bonds and even equities, as has happened in Japan.”

Sainsbury's Local

Sainsbury’s plunges to loss

Supermarket chain Sainsbury’s has posted a first-half loss before tax of £137 million, reflecting £438 million of one-off costs associated with Argos store closures and other strategic and market changes.

It confirmed up to 3,500 jobs will be cut with closure of all of its meat, fish and deli counters. Roles will also go as part of a strategy to shut 420 standalone Argos branches over the next three-and-a-half years.

In the light of improved visibility, strong trading and a strong balance sheet position, the board has chosen to pay a special dividend in lieu of a final dividend for the 2019/20 financial year. The dividend of 7.3p will be paid on 18 December.

It has approved an interim dividend of 3.2p, in line with its policy of paying 30% of prior full year dividend. This will also also be paid on 18 December.

US election

Donald Trump is launching lawsuits to try and overturn the latest results as his rival Joe Biden needs just one more state to win the White House.

It comes after states that showed healthy early leads for Trump – Wisconsin and Michigan – were eventually declared for Biden after mail-in ballots had been counted.

Protests broke out in a number of cities, including New York, as Trump supporters called for recounts.

Markets

CFD and spreadbetting firm IG sees the FTSE 100 around 21 points higher.

After a day of political speculation and tension investors put their faith in some good coming from the eventual winner of the US race to the White House, pushing the FTSE 100 96.49 points (1.67%) higher to close at 5,883.26.

Today’s agenda

* IoD Scotland Conference

* Chancellor makes statement on furlough payments

* UEFA Europa League: Benfica vs Rangers, Celtic vs Sparta Prague

Today’s top Daily Business headlines

Food and drink groups want six-months Brexit grace

‘Give us free parking to bring back shoppers’

Johnson says UK in better position than in first wave



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