Update (17:00): The FTSE 100 has closed 2% higher, lifting from its lunchtime lows thanks to a positive open to US stock markets.
The UK blue-chip index closed at 5,672, up 108 points on the day, recouping some of the day’s gains that were lost when a surge at the open fizzled out in the morning’s trading. ‘Mid-cap’ companies on the FTSE 250 fared even better, closing 3.3% higher.
The rally in Shell’s (RDSb) shares gathered momentum, with the stock closing 7.8% higher at £13.60, despite the price of Brent crude remaining mired below $23 a barrel.
(12:35) Imperial Brands leads the way
The FTSE 100 was trading at 5,596, up 37 points, or 0.7%, on the day but down from a session high of 5,690 reached shortly after the open. UK ‘mid-cap’ companies on the FTSE 250 held onto more of their gains, trading 2.5% higher.
Shares in Imperial Brands topped the index, up 13.7% at £15.16, as the cigarette maker announced it had secured a new €3.5bn (£3bn) credit line even as it reported trading in line with expectations despite the coronavirus outbreak.
Melrose Industries (MRO) joined Imperial at the top of the index, jumping 13.2% to 99p as the turnaround specialist announced it had secured a debt covenant waiver and was cutting expenses, including cancelling its final dividend, to cope with the impact of the Covid-19 pandemic.
Shell rose 6.2% to £13.40 and has rallied nearly 12% over the last two sessions despite the oil price tumbling 6% so far this week, even with today’s 3.2% rise from lows.
The oil giant said it would write down up to $800m (£638m) in the first quarter of 2020 as the oil price has crashed as the coronavirus crisis has crippled demand while Saudi Arabia has launched an aggressive price war.
Russ Mould, investment director at AJ Bell, said investors appeared heartened Shell’s dividend, which it hasn’t failed to pay since World War Two, could survive.
‘The oil major’s trading statement provides updates on production volumes, capacity utilisation rates and an analysis of how sensitive cash flow from operations is to movements in the oil price, but no mention of the quarterly $0.47-a-share dividend,’ he said.
‘Shell’s board therefore seems to be sending a clear message that the dividend payment is not under discussion.’
(8:20) FTSE rallies on China rebound
The FTSE 100 has rallied, building on yesterday’s climb out of the red, as investors were buoyed by the prospect of further stimulus in the US to tackle the economic damage caused by the coronavirus outbreak and a sharp rebound in China’s business activity.
The UK blue-chip index rose 100 points, or 1.8%, to 5,663, while other European markets also opened higher, with the German DAX 30 up 2.4% and the French CAC 40 1.9% higher. ‘Mid-cap’ companies on the FTSE 250 climbed 2.2%.
European markets gained support from a strong close in the US, where the S&P 500 rose 3.4%. US president Donald Trump on Friday signed into law a $2tn stimulus package to aid the country’s economy through the coronavirus pandemic and Bloomberg reported overnight the White House was weighing a fourth round of stimulus, having compiled requests from government agencies totalling roughly $600bn.
A sharp rebound in Chinese business activity also lifted the mood. Purchasing managers’ index (PMI) readings for the country’s manufacturing and services sectors came in at 52 and 52.3 in March, well ahead of the expectations and marking strong recoveries from the record low readings of 35.7 and 28.9 in February. Any reading below 50 indicates contraction, with any reading above showing expansion.
‘Governments around the world are keeping a watchful eye on China as it leads the way out of the pandemic,’ said Robert Alster, head of investment services at Close Brothers Asset Management.
‘The PMI data has beaten expectations, which may indicate the emergence of a path back to normality. But only when there is a clear trend will investors be able to breathe a sigh of relief.’