Economic cost of Covid-19 mounts as Chinese factory profits slump – business live | Business

Apology of the morning goes to Mike Ashley, whose admitted that his Sports Direct chain (now called Frasers) made some serious blunders this week.

In a large helping of humble pie, Ashley has written an open letter, admitting that he should never have tried to keep Sports Direct shops open – or pestered ministers to be treated as an essential service.

He writes;

In hindsight, our emails to the Government were ill-judged and poorly timed, when they clearly had much greater pressures than ours to deal with. On top of this, our communications to our employees and the public on this was poor.

Sports Direct’s (initial) refusal to comply with the government’s call for non-essential shops to shut caused an outcry on social media.

Ashley is now trying to make amends, saying he is putting Sports Direct’s transport operations at the National Health Service’s disposal:

Outside of Frasers Group, I have offered our support to the NHS and we are poised and ready for when that offer is accepted, with our entire fleet of lorries at their disposal – to help deliver medical equipment and supplies. This offer is not limited to the NHS but all key workforces across the Government. We will help wherever possible.

Finally, to reiterate, I am deeply apologetic about the misunderstandings of the last few days. We will learn from this and will try not to make the same mistakes in the future.

UK retailer Next is also among the top fallers in London, down 7.9%, after it halted online shopping last night.

Next told the City that it had responded to employees, who told it they weren’t happy about being dragged to work rather than isolating.

NEXT has listened very carefully to its colleagues working in Warehousing and Distribution Operations to fulfil Online orders. It is clear that many increasingly feel they should be at home in the current climate.

We flagged up earlier this week that Next had been offering a 20% bonus to staff who would come into stores and fulfil online orders, despite Very Clear Instructions from the government to Stay At Home unless your job is Essential.

Some retailers took longer to grasp this than others.

Retail analyst Nick Bubb says:

Well, the shock news that Next has had to temporarily close down its Online business because of warehouse staffing problems is a big blow to the company and may cause a domino effect on other Online fashion operators, including ASOS and Boohoo…

Shares in UK housebuilders are among the top fallers, with Berkeley Group down 8% and Barratt Development losing 8.5%.

Last night, the government effectively put the UK housing market into deep freeze, telling buyers to delay their home moves if possible, and instructing sellers not to allow new viewings.

The new guidance is “adapt and be flexible” while the Covid-19 pandemic plays out. Ministers don’t actually want people to cancel moves, but clearly the market is going to be slow for a while….

….especially as some lenders are pulling mortgage offers:

The slump in Chinese factory profits may have reminded investors that the world economy isn’t in great shape.

For whatever reason, stocks have fallen sharply at the start of trading in Europe.

Every stock on the FTSE is down, pulling the index lower by 181 points or 3% to 5633.

It’s still been a very good few days for stocks, given the FTSE 100 closed below 5,000 points on Monday.

Britain’s car industry is also being hit hard by the coronavirus, with output likely to tumble this year.

My colleague Jasper Jolly explains:

British car production will slump to its lowest level since the financial crisis this year, the industry has warned, after the coronavirus pandemic forced the closure of every large factory in the UK.

Passenger car output will fall by 18% to only 1.1m in 2020, down from 1.3m last year, according to forecasts for the Society of Motor Manufacturers and Traders (SMMT) carried out by AutoAnalysis. It would be the lowest number since the depths of the financial crisis in 2009, when 999,460 cars were made in the UK.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The economic costs of Covid-19 are rising, fast, as the outbreak drives the global economy into recession.

Overnight, China has reported a huge tumble in factory profits for the first two months of this year — down 38.3% year-on-year to 410.7 billion yuan (roughly £47bn).

That’s the steepest slump since the National Bureau of Statistics started publishing the data in 2020

January and February are usually interrupted by the week-long Lunar New Year. But the coronavirus crisis has created much more disruption, with factories unable to reopen on schedule due to mass quarantine rules and transport disruption.

Car makers, electrical equipment and electronics manufacturers, and chemical companies all reported particularly hefty drops in earnings – a sign of which parts of the economy have suffered.

Such a huge slump in profits shows that China’s economy has take a serious hit, with growth certain to slow very sharply this year.

As Reuters puts it:

The decline in profits points to lingering trouble for the manufacturing sector, which is wrestling with fallout from the health crisis that has severely hurt output. Most analysts now expect a contraction in gross domestic product in the first quarter.

Industrial production and sales fell sharply amid epidemic control efforts, while the costs of labor and depreciation continued to put pressure on companies, a statistics bureau official said in a statement published alongside the data.

The data comes a day after America posted its biggest jump in weekly jobless claims ever — with over three million US citizens filing for unemployment benefit.

Later today we discover how badly US confidence has been hit by the crisis – despite Donald Trump’s efforts to play it down, and insists America will be back to work soon.

After several very strong days, European stock markets are expected to dip today as investors ponder the damage being caused to the world economy.

The agenda

• 2pm: University of Michigan’s survey of US consumer sentiment: expected to fall to 90, from 95.9
• 5pm: Baker Hughes count of US oil rigs