Meanwhile the airline industry suffered another huge blow due to the coronavirus pandemic this morning as one particular airline saw its stock value drop below the required threshold to be part of of the FTSE 100 index. As of 10.10am (GMT) today, the FTSE 100 had dropped slightly by just over 26 points compared with yesterday. The Euronext 100 was down by seven points, the CAC 40 in France fell by 36 points, Germany’s DAX was down by 94 points while the Swiss Market Index fell by 64 points.
Stocks are down across Europe against a backdrop of second wave fears
Chris Beauchamp, Chief Market Analyst at IG, commented: “The FTSE 100 is down 13 points in early trading, ahead of a crucial ECB meeting that should see an increase in stimulus efforts.
“Markets are edging lower of an ECB meeting that is expected to deliver fresh stimulus for the struggling eurozone economy.
“The actual market impact today of a fresh boost may be limited, given how widely-expected the move is, but it signals the continued willingness of central banks to act, and investors should be reassured by this.”
Easyjet has lost nearly 45 percent of its market value this year, with cruise operator Carnival also being down more than 67 percent. They have seen a huge fall in demand for travel during the coronavirus pandemic. FTSE Russell, the global index provider, has said both companies would be relegated to the FTSE 250. They will join British Gas owner Centrica and engineering company Meggitt.
But Russ Mould, investment director at AJ Bell, added the airline could make a comeback later in the year.
He told Sky News: “EasyJet would need a big rally, but it could come back in September (when the next reshuffle is due).
“With airlines, anything is possible.”
Meanwhile the European Central Bank will today discuss proposals to expand its Pandemic Emergency Purchase Programme (PEPP) to try and mitigate the continent-wide impact of the coronavirus pandemic.
In the German capital of Berlin, cases rose to more than 300 on Tuesday, with another 35 cases recorded, and the R rate standing at 1.95.
In Spain. official figures have raised questions over nearly 17,000 unexplained deaths which may be linked to the virus.
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The FTSE 100 surged by 50 points after the announcement before falling back somewhat
5pm update: FTSE 100 closes
The FTSE-100 index at the close was down 40.97 at 6341.44.
4pm update: FTSE 100 update
The FTSE-100 index at 3:45pm was down 25.63 at 6356.78.
3.51pm update: Economist responds to today’s ECB decision
Barret Kupelian, senior economist at PwC, comments on today’s ECB decision: “Today’s announcement from the ECB saw the adjustment of the size and duration of the firepower of the Pandemic Emergency Purchase Programme (PEPP) from €750 billion to €1.35 trillion Euro, ahead of market expectations. It also announced that the PEPP would be extended to ‘at least the end of June 2021’.
“The ECB revised downwards its projections for economic activity compared to its pre-COVID 19 March projections—it now estimates that the union will contract by around nine percent in 2020 in its baseline scenario. This change brings it in line with other forecasts including that of the EU Commission, which estimates a contraction of around 7.7 percent this year.
“With respect to the profile of the recovery, the ECB estimates output is likely to be around 4% below its pre-crisis level, suggesting that the chances of a V shaped bounce back are slim. A more sluggish growth is consistent with fast moving data for retail and recreation movements (see Figure 1), which remain around 20-40 percent lower than pre-crisis levels in large Eurozone member states, despite some considerable pick-up in activity in May.
“The baton is now in the hands of the European Union leaders who are tasked with ironing out the details of the EU’s budget (Multiannual Financial Framework) – a significant component of which includes half a trillion Euros of grants to the EU states most negatively affected by the virus. This, coupled with Germany’s newly announced large fiscal stimulus, could help set in motion the recovery.”
2.50pm update: FTSE 100 update
The FTSE-100 index at 2:45pm was down 47.22 at 6335.19.
1.45pm update: FTSE 100 update
The FTSE-100 index at 1:45pm was down 66.70 at 6315.71.
1.15pm update: ECB aims to reassure investors
The ECB also said it would reinvest bonds maturing in its pandemic emergency purchase scheme at least until the end of 2022.
As the downturn runs deeper and longer than expected, governments are running record deficits to cushion the impact of the pandemic, putting a greater burden on the ECB to soak up this new debt and keep borrowing costs manageable.
The ECB has always made clear it will do its part and Thursday’s move should reassure both governments and investors that it will not tolerate a rise in yields that might foster doubts about the viability of European debt.
Young’s hopes to begin serving pints again next month
1pm update: ECB confirms plan to plough £1.2trillion into coronavirus mitigation measures
The European Central Bank has confirmed it is to spend £1.2trillion (1.35trillion euros) on its pandemic emergency purchase programme (PEPP).
A statement issued after today’s meeting said: “In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.
“WThe purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
“This allows the Governing Council to effectively stave off risks to the smooth transmission of monetary policy.”
ECB President Christine Lagarde will deliver a statement at 2.30pm explaining the reasons behind the decision.
12.50pm update: Watchdog revises coronavirus hit to UK economy up to £132.5billion
The cost of Britain’s emergency spending and its tax cuts to soften the economic hit from the coronavirus crisis is likely to be £132.5 billion, up from a previous estimate of £123.2billion, the country’s budget watchdog said.
The Office for Budget Responsibility updated its estimates after finance minister Rishi Sunak provided details of a four-month extension of the government’s wage subsidy scheme.
The OBR has previously estimated that Britain is on course for a roughly £300billion hole in its public finances this financial year, including the loss of tax revenues caused by the government’s shutdown of much of the economy as well as the cost of its emergency spending and tax measures.
The FTSE 100 as of 12.05pm
Pub chain Young’s has set out plans to begin reopening premises next month as it bids to bounce back from the coronavirus pandemic.
The company has 276 pubs, mainly in London, and hopes to be in a position where they can be open for business by the middle of July.
Failing that, it plans to have all sites open by August 3.
In a bid to reduce the risk of infection, the pubs will implement a one-metre social distancing rule, rather than the two metres currently in force across the country.
12.06pm update: “We will always bet the economy”
American Airlines Group Inc said Thursday it will boost its US flight schedule next month over dramatic reductions since the coronavirus pandemic, planning to fly more than 55 percent of its July 2019 domestic capacity.
The largest US airline will also boost its international flights schedule next month, flying nearly 20 percent of its July 2019 schedule.
By comparison, American flew just 20 percent of its domestic schedule in May and is flying 25 percent in June, said Vasu Raja, American Airlines’ senior vice president of network strategy.
He said: “As an airline, we’ve consciously bet on demand coming back.
We have bet the economy.”
11.38pm update: Markets waiting for ECB meeting, says analyst
With respect to today’s European Central Bank meeting, Chris Beauchamp, Chief Market Analyst at IG, said: “The FTSE 100 is down 13 points in early trading, ahead of a crucial ECB meeting that should see an increase in stimulus efforts.
“Markets are edging lower of an ECB meeting that is expected to deliver fresh stimulus for the struggling eurozone economy.
“The flow of liquidity over the past few months has been prompt and overwhelming, helping economies to weather the most perilous time in years, and for the time being it shows no sign of letting up.
“The actual market impact today of a fresh boost may be limited, given how widely-expected the move is, but it signals the continued willingness of central banks to act, and investors should be reassured by this.
“Additional support from the German and Australian governments has also provided reason for optimism, as politicians look to bolster their respective economies in the face of an uncertain future.
“While the bounce has paused for breath, and eurozone stocks in particular look rather stretched after their recent run higher, equity markets remain impressively resilient in the face of a still-uncertain economic situation, where unemployment, consumer spending and industrial activity are all set to remain under pressure for the foreseeable future.”
10.56am update: Amazon in talks over $2 billion investment in Indian company
Amazon.com is in early-stage talks to buy a stake worth at least $2 billion in Indian mobile operator Bharti Airtel, three sources with knowledge of the matter told Reuters, underscoring the growing attraction of India’s digital economy for U.S. tech giants.
The planned investment, if completed, would mean Amazon acquiring a roughly 5% stake based on the current market value of Bharti, which is India’s third-largest telecoms company with more than 300 million subscribers.
The discussions between Amazon and Bharti come at a time when global players are placing major bets on the digital arm of Reliance Industries, which owns Bharti’s telecom rival Jio.
Reliance’s digital unit has raised $10 billion in recent weeks from Facebook, KKR and others.
10.34am update: “Light at the end of the tunnel,” claims German Economy minister
German Economy Minister Peter Altmaier has said his aim is for Europe’s largest economy to return to pre-crisis levels in the second half of 2022.
Mr Altmaier told reporters: “There is light at the end of the tunnel.”
His aim was for Germany to return to growth in the second half of this year, he added.
10.04am update: Shares dip after strong gains earlier in the week
UK shares dipped from three-month highs on Thursday following strong gains earlier in the week on bets of a rebound in post-coronavirus economic activity.
The blue-chip index edged down about 0.1 percent, with basic materials and financial stocks among the biggest drags.
Gains for AstraZeneca and industrials stocks capped further declines.
The mid-cap FTSE 250 also fell 0.1 percent and was set to snap a three-day winning streak, with real estate stocks, life insurers and banks among the biggest decliners.
Elsewhere in Europe, investors awaited a central bank meeting where policymakers are expected to provide more aid for some of the worst-hit euro zone economies.
David Madden, markets analyst at CMC Markets, said: “Market participants have taken some cash off the table given the strong run and ahead of the ECB meet today.”
The FTSE 100 as of 9.33am today
9.49am update: Gradual reopening of building sites has cushioned blow for construction image, says survey
The gradual reopening of Britain’s building sites helped slow the pace of contraction in the construction sector last month after a record slump in April, according to a report.
The closely-followed IHS Markit/CIPS construction purchasing managers’ index (PMI) rose to 28.9 in May from an all-time low of 8.2 in April.
But the reading was still the second lowest on record since February 2009.
A score above 50 means the sector – the biggest in the UK economy – is growing, but anything below 50 means it is shrinking.
9.15am update: Banks asked to provide details of bad debt estimates
Britain’s lenders are being asked by the Bank of England to give details on their expected losses on loans due to the coronavirus crisis as the sector is braced for a wave of borrower defaults.
Sam Woods, deputy governor at the Bank and chief executive of the Prudential Regulation Authority (PRA), said the PRA plans to gather together the information from firms ahead of their half-year results this summer.
It comes as the Bank recently estimated that loan losses at banks could hit £80 billion by the end of 2021 as part of a recent stress test of the sector.
It assured last month that UK banks were strong enough to keep lending to households and businesses throughout the crisis.
Shares in Apple have been tipped to hit $2billion
8.59am update: Euro slips prior to ECB meeting
The dollar strengthened on Thursday, reversing its weakening trend of the past seven days, while the euro slipped ahead of a European Central Bank meeting at which policymakers could step up stimulus measures.
The ECB is expected to increase the size of its 750 billion euro ($840 billion) Pandemic Emergency Purchase Programme to support Europe’s weakest economies – although some investors think this will happen at July’s meeting rather than today.
Adam Cole, chief currency strategist at RBC Capital Markets, said: “For EUR, the direct implications of increasing the size of the PEPP are limited, but combined with the developing recovery fund, the implied improvement in the responsiveness of policy is positive.”
But Commerzbank’s FX and EM analyst Thu Lan Nguyen said that any further gains for the euro could be limited by a large amount of positive economic news already being priced in by investors.
8.53am update: ECB arguments “finely balanced”, says expert
Speaking of which, the European Central Bank is certain to give the ailing euro zone economy another shot in the arm at today’s meeting, an expert has said -but with arguments split over its timing, the only question is whether it will act on Thursday or hold out until July.
Governments are running record deficits to cushion the impact of the coronavirus pandemic, putting a greater burden on the ECB to soak up this new debt and keep borrowing costs manageable.
The ECB has made it clear it will do its part and the severity of the slump argues for earlier action.
But a still-elusive political deal on European Union-wide fiscal support strengthens the case for patience.
Berenberg economist Holger Schmieding said: “Arguments for and against scaling up the stimulus are finely balanced.
“On balance, we see a 60% probability that the ECB will raise its asset purchase target on Thursday, probably by 500 billion euros.”
8.51am update: Government pledges £10billion in trade credit insurance schemes
The Government has said it will guarantee up to £10billion in trade credit insurance schemes in its latest move intended to support UK business in the face of coronavirus.
Trade credit insurance protects firms from the risk that their customers collapse before being able to pay for goods or services.
The state guarantees mean that the vast majority of current insurance coverage can be maintained despite current uncertainty, the Government said.
8.49am update: Anxious investors await ECB meeting outcome
A European stock market rally paused on Thursday, with investors focusing on a European Central Bank meeting where policymakers are expected to provide more aid for the battered euro zone economy.
The pan-European STOXX 600 index slipped 0.5 percent by 7.08am (GMT), but held near its early March highs, while eurozone stocks were down 0.6 percent.
Automakers and banks led the declines, falling 2.5 percent and 1.8 percent, respectively.
Equity markets have bounced strongly this week, with Wall Street’s tech-heavy Nasdaq nearing record levels as signs of recovery from a coronavirus-forced recession, optimism over a COVID-19 vaccine and hopes of more stimulus boosted risk appetite.
8.34am update: Companies face FTSE “relegation” after poor showings
Easyjet has lost nearly 45 percent of its market value this year, with cruise operator Carnival also being down more than 67 percent.
They have seen a huge fall in demand for travel during the coronavirus pandemic.
FTSE Russell, the global index provider, has said both companies would be relegated to the FTSE 250. They will join British Gas owner Centrica and engineering company Meggitt.
The FTSE 100 as of 8.35am today
8.25am update: FTSE dips after three-month high
London’s FTSE 100 dipped from three-month highs on Thursday following strong gains earlier in the week on bets of a rebound in post-coronavirus economic activity, while energy firms tracked a fall in oil prices.
The blue-chip index was down 0.4 percent and on track to post its first decline this week. BP Plc and Royal Dutch Shell Plc shed 0.4 percent and 1.1 percent, respectively, and were among the biggest drags on the FTSE 100.
The mid-cap FTSE 250 fell 0.6 percent, also set to snap a three day winning streak, with real estate stocks, life insurers and banks among the biggest percentage losers.
Car dealership firm Lookers tumbled 5.2 percent after setting out plans to close 12 sites and lay off 1,500 employees amid the coronavirus crisis, and saying a probe into its operations highlighted the need to improve “some behavioural and cultural aspects”.
Luxury carmaker Aston Martin shed 5.4 percent on announcing plans to shed up to 500 jobs as it seeks to bring its cost base into line with reduced sports car production levels.
8.15am Trading underway
The FTSE-100 index opened at 6382.41.
8.04am update: Apple shares on course to hit $2trillion
Shares in tech giant Apple have been tipped to pass an eye-watering $2trillion within four years, coronavirus pandemic notwithstanding.
Evercore ISI analyst Amit Daryanani thinks the stock could hit a $2 trillion market cap within four years, which would spell a increase of share values of between 13 and 17 percent annually.
In a note, he said: “Apple continues to offer the best risk/reward in large-cap tech and long-term investors should use any weakness to add to positions.”
7.51am update: ‘Traders should be cautious’
Mr Mahony added: “China provides a leading gauge of where the likes of Europe and the US could be if a similar path is taken.
“However, traders should be cautious given that this rise back into expansion does simply highlight month-on-month improvements rather than making any relative comparison to pre-crisis levels.
“Nevertheless, with the Chinese services sector growing sharply in May, there is a hope that we will see something similar in the UK once businesses can reopen.”
Police wearing masks outside the ECB in Frankfurt in March
7.48am update: Markets hampered by second wave fears, warns analyst
Fears over a second wave of COVID-19 are continuing to hamper markets worldwide, an analyst at IG has warned.
Speaking yesterday, Senior Market Analyst Joshua Mahony said: “The big risk for markets comes in the form of a second wave, and the recent deterioration in social distancing certainly does pose a risk that we will see restrictive measures reimposed to the detriment of value stocks.
“Overnight data from China has helped bolster confidence of an economic rebound in the region, after the Privately compiled Caixin services PMI reading jumped into strong expansion.”
7.37am update: ECB “still on the hook”
Mr Kupelian added: “The reality of the situation is that the ECB still remains on the hook to secure recovery in the monetary block.
“The European Commission’s latest proposal of the ‘Next Generation EU’ recovery instrument is significant both in terms of size and content as it includes a combination of grants and loans.
“But it still needs to be negotiated amongst the EU member states and will come to force in 2021.”
The FTSE 100 finished on 6,382.41 points yesterday, up 2.61 percent
7.26am update: ECB “will push ahead with COVID-19 plan despite court ruling”
Speaking ahead of today’s crunch meeting, an economist has predicted the European Central Bank will push ahead with its controversial plan aimed at propping up economies badly hit by the coronavirus pandemic.
Barret Kupelian, PwC Senior Economist, said: “On Thursday we expect the European Central Bank (ECB) to remain undeterred by the recent ruling of the German constitutional court and expand its Pandemic Emergency Purchase Programme (PEPP) as already signalled by some members of its Governing Council.
“To justify this move, the ECB is likely to cite its revised economic projections which will also be presented on Thursday.
“These will incorporate the latest Q1 data on economic activity and show that the monetary union is likely to shrink between seven percent to 16 percent this year.
“More importantly, the Governing Council is expected to highlight the below target level of Eurozone inflation, some of which is being driven by the low level of oil prices globally.”
7.20am update: Euro holds on to gains prior to ECB meeting
The euro held onto gains before a European Central Bank meeting later on Thursday, where policymakers are expected to increase debt purchases to support the bloc’s weakest economies.
Oil prices fell, reversing gains made the previous session, due to uncertainty about supply cuts by major producers.
Markets for risk assets have been on a tear in recent days, carrying some stock market indexes to within sight of levels before the coronavirus outbreak.
The Nasdaq Composite,, the S&P 500, and the Dow Jones Industrial Average are close to overtaking all-time closing highs registered in February.
ANZ Research senior economist Liz Kendall and strategist David Croy, said in a note early on Thursday: “Liquidity provision by central banks – and expectations that more is coming – is helping to support the recent drive in risk markets.”
7.14am update: Asian shares rise on coronavirus recovery hopes
Asian shares rose to a two-month high on Thursday as expectations of further government stimulus boosted the confidence of investors in an economic recovery from the global coronavirus pandemic.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.43 percent, earlier touching the highest since March 9.
Shares in Australia rose 0.93 percent after the country’s prime minister unveiled a fourth stimulus package to repair the economy, this time aimed at the battered construction sector.
Chinese shares were little changed due to lingering worries about diplomatic tension between the United States and China, while US stock futures fell 0.15 percent.
Euro Stoxx 50 futures were down 0.03 percent, German DAX futures were up 0.17 percent, while FTSE futures were down 0.1%, suggesting a cautious start for European equities.
6.02am update: HSBC, StanChart shares rise in Hong Kong after backing China security law
Hong Kong-listed shares of HSBC and Standard Chartered rose on Thursday after the banks backed China’s imposition of a national security law on the city, even as a pro-democracy and newly formed financial workers’ union criticised the move.
Some staff at the Asia-focused British banks and analysts said HSBC and Standard Chartered’s stance on the law would help them protect their businesses in their single most important market of Hong Kong.
HSBC shares were up 1.6 percent at noon, after having risen as much as 2.8 percent earlier, and StanChart jumped 2.3 percent. The broader Hang Seng market index was down 0.1 percent.
In a break from their usual policy of political neutrality, both banks on Wednesday backed the national security law that has drawn global condemnation and revived anti-government demonstrations in the former British colony.
“Investors should welcome these statements,” said Hao Hong, Hong Kong-based head of research at brokerage BOCOM International. “It could get shitty if you are in the city and don’t support the law.”