The week in investor relations: Corporate warnings, halted buybacks and closed trading floors
– The global economy is already in recession as a result of the Covid-19 outbreak, according to a poll of economists carried out by Reuters. Of 41 economists based in Europe and the Americas, 31 said global economic expansion had stopped. 'Last week we concluded that the Covid-19 shock would produce a global recession as nearly all of the world contracts over the three months between February and April,' said Bruce Kasman, JP Morgan's head of global economic research.
– The Wall Street Journal noted that CFOs expect the coronavirus outbreak to have a negative impact on their operations, revenue and profits. In a survey of finance chiefs by PwC, 54 percent of respondents say the virus ‘has the potential for significant impact to their business operations.’ The respondents were mainly from Fortune 1000 companies and based in the US or Mexico.
– US carmaker Ford has suspended its dividend and halted its guidance as it reviews the impact of coronavirus, reported Bloomberg. ‘While we obviously didn’t foresee the coronavirus pandemic, we have maintained a strong balance sheet and ample liquidity so that we could weather economic uncertainty and continue to invest in our future,’ said CEO Jim Hackett in a statement.
– A string of British companies have warned about the impact of Covid-19 on their businesses, according to the Guardian. Clothing retailer Next said retailers were facing a crisis ‘unprecedented in living memory’. Burberry said sales in some shops had fallen by 40 percent-50 percent since a profits warning last month. Bus companies, publishing firms and cinema operators also issued warnings.
– The NYSE said it will close its trading floor from next Monday, but that markets should remain open despite volatile trading conditions, reported the BBC. ‘While we are taking the precautionary step of closing the trading floors, we continue to firmly believe the markets should remain open and accessible to investors,’ said NYSE’s president Stacey Cunningham.
– The Financial Times (paywall) reported that many banks have halted their share buyback programs and other companies are expected to follow suit. As of Wednesday, eight banks had stalled buyback programs this week, including Goldman Sachs and Morgan Stanley, noted the article. Buybacks have been one of the factors supporting the record 11-year bull run in equities, which ended this year, and removing them could lead to further share price falls, the FT added.
– France extended its short-selling ban to one month in response to the coronavirus outbreak, reported the Business Times. The French financial regulator made the announcement on Tuesday, saying in a statement that it had ‘decided to prohibit with immediate effect the creation of any new short positions or any increase in existing short positions.’