What to watch: UK banks told to keep lending, stocks rise, inflations falls

Edmund HeaphyFinance and news reporter
Yahoo Finance UK
A lone security guard stands outside the Bank of England. Photo: Getty
A lone security guard stands outside the Bank of England. Photo: Getty

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

UK banks warned to keep lending to firms

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UK banks have been told to keep lending to businesses to ensure that they do not collapse as a result of the coronavirus pandemic, the Bank of England and the government warned on Wednesday.

In a joint letter to the bosses of the country’s major banks, chancellor Rishi Sunak, newly installed Bank of England Governor Andrew Bailey and interim Financial Conduct Authority chief executive Chris Woolard urged them to support companies whose business models had proven viable before the onset of the crisis.

“This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over,” they wrote.

They noted that lenders were expected to support all types of companies, and not just those covered by the previously announced support schemes.

European stocks rise as US agrees $2tn stimulus package

Stocks in Europe climbed on Wednesday after US lawmakers and the Trump administration came to an agreement on a sweeping $2tn (£1.65tn) stimulus package designed to curb the economic fallout of the coronavirus pandemic.

The pan-European STOXX 600 index (^STOXX), which rose by a record 8.4% on Tuesday amid increasing optimism about the stimulus measures, was up by around 3.4%.

London’s FTSE 100 (^FTSE) rose by around 3%, while France’s CAC 40 (^FCHI) was 3.5% in the green.

Germany’s DAX (^GDAXI), which had its best day since 2008 on Tuesday, was up by around 2.7%.

Early on Wednesday morning, US senators Mitch McConnell and Chuck Schumer announced the far-reaching provisions, which are set to form the largest economic stimulus package in modern American history.

UK inflation slows on back of falling oil prices

Shoppers have been warned food prices could rise later this year, despite a downward trend in overall inflation in the UK.

The latest official figures published on Wednesday show the rate of inflation has dropped slightly as oil prices (BZ=FCL=F) have tumbled.

Average prices for common goods and services in Britain were up 1.7% in February compared to a year earlier, in line with analysts’ forecasts and down from 1.8% in January.

Falls in the cost of fuel and video games were among the main reasons the pace of price increases slowed.

Ruth Gregory, senior UK economist at Capital Economics, said food prices could rise later this year despite supermarkets widely holding down prices so far despite soaring demand.

Halfords warns on jobs amid coronavirus pandemic

Halfords (HFD.L) has warned hundreds of thousands of people including key workers could be affected if it stopped trading because of the coronavirus pandemic.

Graham Stapleton, CEO of the car parts and bike retailer, said his company was facing an “unprecedented challenge,” and said the health and safety of staff and shoppers was its main priority.

But the company said in a statement on Wednesday it was determined to remain open, and had received government approval to do so as a provider of “essential services.” Its share price spiked after the announcement, up 10.7% in early trading.

Halfords, which has 446 branches and 369 garages, kept its garages and mobile van services running as normal, and plans “partial” store openings from later this week.

What to expect in the US

Futures were pointing to a higher open for US stocks on Wednesday.

S&P 500 futures (ES=F) rose by around 1.7%, while futures on the Dow Jones (YM=F), which had its best day since 1933 on Tuesday, climbed by more than 2.7%.

Nasdaq futures (NQ=F) were up by more than 1.6%.

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