Banks do away with dividends, buybacks under regulator pressure
London-listed stocks rallied yesterday, following the release of data showing manufacturing in China had rebounded in March as the country emerged from its coronavirus-induced shutdown, although concerns over the accuracy of the figures persist. Despite closing the day higher, it was still a rollercoaster day for the FTSE 100. Having jumped shortly after the market open, the index fell back to a daily loss by lunchtime before rallying to a 2% gain in the afternoon. The big corporate news on Wednesday was a decision by the largest banks in the UK, under pressure from regulators, to halt their dividend payments days ahead of billions of pounds worth coming due. Lloyds, RBS, Barclays, HSBC, Santander and Standard Chartered all said they would cancel their dividends for 2019, halt share buybacks and not set aside cash for investor payouts this year. Although the move was anticipated, investors still responded negatively to the news. Lloyds Banking Group was the hardest hit, closing 4.5% down, followed by RBS at 3.8% and Standard Chartered at 2.1%. Lloyd’s is now trading at less than half of the value it was at the start of the year and is not far off the lowest close price we saw during the financial crisis.
- FTSE 100: +2% Tuesday, -24.8% YTD
- FTSE 250: +3.3% Tuesday, -31% YTD
What to watch
ISM manufacturing index: The ISM manufacturing index is a closely watched indicator of recent economic activity in the US, which is based on a survey of purchasing managers at 300 plus manufacturing firms. Expectations are for the index to come in at around 44, down from 50.1 last month (a figure above 50 indicates growth, while sub-50 indicates contraction). The figure for March will be released on Wednesday; last month, the index showed a slight dip but the data only captured the very early days of the coronavirus spread in the US. The release follows data from Chicago on Tuesday, where economic activity appeared to have deteriorated by less than anticipated.
ADP employment report: ADP is a private sector payroll processing company, which will put out its monthly national employment report for March on Wednesday, based on data from its clients. The report is expected to include more data from the second half of the month than government figures which will come out on Friday. Median forecasts predict a figure of 150,000 jobs lost, versus the 183,000 net additions in February. Data points such as this will likely feed into lawmakers’ decisions around the size and scope of future stimulus packages, which are reportedly already in the works even as the ink dries on the $2.2trn round just passed.
Motor vehicle sales: A first look at what is in store for carmakers in terms of the coronavirus impact will also be available on Wednesday, when motor vehicles sales will be released for March by most large firms — including Ford, General Motors and Toyota. The median forecast is for an annualised sales rate of 11.3 million, down from around 17 million a month ago. US listed Ford, General Motors and Fiat Chrysler have all lost more than 40% of their value in 2020 so far, adding to years of decline in the case of Ford and Fiat and stagnation in the case of General Motors.
Crypto corner
The rebound in crypto currencies paused overnight and continued into this morning, with the three largest cryptoassets all seeing marginal declines.
Bitcoin was off 2% at $6,300, while Ethereum was 1.3% lower at $131 and XRP was down 1.9% at $0.170. The dip comes after a sharp rebound which has seen all three currencies jump 30% or more off lows.
We have previously mentioned the upcoming bitcoin halving in May, well there will be another halving event before this. Miner rewards for Dash are designed to reduce by 7% year on year, the next event is on April 27th. Bitcoin halving events have seen a price rally in the past due to the notion that a lower mining incentive will result in a reduction in supply. It will be interesting to see if we see a similar impact on Dash over the coming weeks.
All data, figures & charts are valid as of 1/04/2020. All trading carries risk. Only risk capital you can afford to lose.
This is a marketing communication and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without having regard to any particular investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared utilizing publicly-available information.
