Shares rally across UK, Europe and Asia, and Redrow joins list of companies not paying dividends

“Stock markets have bounced back after a series of measures and new data on coronavirus cases gave investors more confidence that the crisis can be resolved,” says Russ Mould, Investment Director at AJ Bell.

“Central banks are doing everything they can to provide support to the markets including the US Federal Reserve’s unlimited bond buying.

“The UK’s stricter lockdown rules provide some hope that the spreading of the virus can be slowed in this country.

“And the fact that Italy has recorded a smaller increase in coronavirus cases for the second consecutive day would suggest that its containment measures are working.

“The FTSE 100 jumped 3.7% to 5,180, driven by gains in miners and oil producers. The top riser was Carnival, up 9.2% as investors took the view that too much bad news had been priced into its stock. Holiday seller TUI was also one of the best performers on the FTSE for similar reasons, rising 8.5%. Both these stocks had previously suffered sharp declines on fears about demand for their services.

"Just Eat Takeaway soared by 7.1% in anticipation that its food ordering and delivery capabilities will be very important during the UK’s stricter lockdown. Restaurants and cafes will be allowed to stay open only for food delivery and takeaway services. With more people afraid of leaving their home, Just Eat’s platform could see a significant increase in demand.

“Only three FTSE 100 stocks were down in early trading on Tuesday – utility providers United Utilities and Centrica, and Primark owner Associated British Foods.

“European markets rallied even harder including a 5.3% gain Germany’s DAX index. In Asia, Japan’s Nikkei 225 jumped by 7.1% and Hong Kong’s Hang Seng index advanced by 4.5%.

“Oil rebounded by 2.9% to $27.82 per barrel and the pound strengthened 0.9% against the US dollar.”

Redrow

“The scale of the coronavirus impact on the housebuilders is evident in today’s news that, despite a strong balance sheet, Redrow will cancel a previously declared first-half dividend as it looks to batten down the hatches.

“While it enjoyed a net cash position as at the beginning of the year, investors had a reminder that this is just a snapshot of the company’s financial position as it revealed it currently has net debt upwards of £100m.

“This is expected to reduce rapidly in a matter of weeks as a high volume of homes legally complete – although it certainly seems possible some of these transactions could be disrupted. The company is also likely to pause land buying for the foreseeable future which should free up cash.

“Notably, for now Redrow’s construction sites remain open. Given the scale of the UK’s housing crisis, which will remain an issue after the coronavirus outbreak has abated, there is potentially a debate to be had over whether or not this work is essential.

“Initial suggestions from the Government seem to be that housebuilding can continue so long as social distancing is observed but it is worth noting that lockdown conditions in other European countries have become progressively stricter over time.

“For the time being the business is, like of all of us, adapting to a new reality and future decisions on dividends and more detailed guidance on trading will have to wait.”

These articles are for information purposes only and are not a personal recommendation or advice.