What to watch: Record falls in French and Spanish GDP, Lloyds profit dives, and Shell cuts dividend

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A family watches French President Emmanuel Macron's televised speech, Monday April 13, 2020, in Lyon, central France. (AP Photo/Laurent Cipriani)

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

Record falls in French and Spanish GDP

France and Spain have recorded their sharpest drop in quarterly GDP ever, as the novel coronavirus pandemic ravages their economies.

France officially fell into recession on Thursday after recording its steepest drop in quarterly GDP since records began in 1949.

France’s statistics agency INSEE said GDP contracted by 5.8% in the first quarter of 2020.

The slump was caused by the strict lockdown introduced in France on 17 March to curb the spread of COVID-19. The lockdown caused household consumption to drop 6.1% in the quarter, while empty factories meant exports slumped by 6.5%.

Spain’s national statistics office, INE, said GDP fell by 5.2% in the first quarter. That was also the worst reading ever recorded, although official records only stretch back to 1995.

Spanish statistics officials said COVID-19 was also to blame for the historic drop in economic activity. Spain went into lockdown on 14 March and has been one of the hardest hit eurozone nations by the pandemic.

Both France and Spain’s GDP numbers were worse than analysts had expected. The first estimate for eurozone-wide GDP is due at 10am UK time.

Lloyds Bank profit dives

Lloyds Bank’s (LLOY.L) first quarter profits crashed by 95% and revenue slipped, as the lender braced for the impact of the COVID-19 pandemic on its business.

Lloyds said on Thursday it had set aside £1.4bn ($1.7bn) to cover expected loan losses caused by the coronavirus pandemic’s economic impact. The provisions for losses were far more than analysts had expected and five times what the bank set aside in the same quarter a year ago.

The hefty loss provision pushed Lloyds to a pre-tax profit of just £74m in the first quarter of 2020 — 95% lower than a year earlier and less than a tenth of what analysts had forecast.

Net revenues at the bank were £3.95bn, slightly below forecasts and down 11% on the prior year. The bank blamed lower interest rates and the competitive banking environment.

Return on tangible equity, a key measure of bank performance, was 5%. Analysts had expected 4.7%.

Shell cuts dividend for first time since World War II

Oil giant Shell (RDSB.L) has cut its dividend for the first time since the end of the World War II, as collapsing demand fuel demand batters the business.

Shell said on Thursday it was cutting its quarterly dividend by 66% to $0.16. It marks the first reduction in payout to shareholders since the time of World War II.

Shares in the company slumped 6.8% in London.

The announcement came as Shell reported a slump in business in the first quarter, caused by the COVID-19 pandemic and plummeting oil prices.

Shell fell to a loss attributable to shareholders of $24m (£19.2m) in the first quarter of 2020, compared to a profit of $6bn a year earlier. Net income adjusted for cost of supply, Shell’s standard profit measure, halved to $2.7bn.

Sainsbury’s to take £500m hit from COVID-19

Sainsbury’s (SBRY.L) shares crashed on Thursday as it warned a £500m hit from the coronavirus would leave its profits near flat, despite soaring grocery sales during the lockdown.

Britain’s second largest supermarket had seen its stocks briefly surge 2.1% on the open as it said its underlying pre-tax profits would be “broadly unchanged” in the year ahead.

The company’s shares then tumbled as concerns grew about its outlook for the year ahead after its preliminary results for its last financial year to 7 March and more recent trading update were published. It was trading 3.5% lower by around 9am in London.

Markets climb on 'encouraging' Gilead trial and Fed support

Major European stocks continued to climb on Thursday, as hopes over a coronavirus drug trial and support from the Federal Reserve lifted stocks.

The pan-European Stoxx 600 index (^STOXX) rose by 0.4%, while Germany’s DAX (^GDAXI) climbed by around 0.7% and France’s CAC 40 (^FCHI) was up 0.8% at around 8.30am in London.

London’s FTSE 100 (^FTSE) also rose on the open, before sliding 0.3% as oil giant Shell and asset manager St James’ Place slashed dividends. The UK’s leading index had risen to a seven-week high on Wednesday.

It came after “encouraging” results were reported from a coronavirus treatment trial using the remdesivir drug, created by US biopharmaceutical giant Gilead Sciences (GILD).

US futures were pointing to a quiet open in New York later today. S&P 500 futures (ES=F) and Dow Jones Industrial Average futures (YM=F) were both flat, while Nasdaq futures (NQ=F) were 0.4% higher.