E3: Markets slide as UK banks cancel dividends and factories slump - business live

Rolling coverage of the latest economic and financial news, as stocks begin the new quarter with fresh losses

UK banks may have acted together last night, but they did so under duress.

City regulators effectively forced the banks to scrap dividends, to strengthen their finances.

The co-ordinated action came after the Prudential Regulation Authority gave banks an 8pm deadline to agree to cancel dividend payments and share buybacks and to make a statement by 9pm. If they did not do so, the PRA warned that it could use its supervisory powers to force banks to comply.

Newsflash: European factories had a torrid time in March, particularly in Italy, Greece and France.

Manufacturers have reported that output and new orders slumped last month, due to the impact of Covid-19 shutdowns, forcing a surge in job cuts.

Manufacturers also cut their employment levels over the month, with the net reduction in staffing numbers the sharpest recorded by the survey in over a decade. Job losses were especially acute in Austria, Germany and Ireland.

UK banks aren’t the only companies taking drastic action to cope with Covid-19.

Housebuilder Taylor Wimpey has announced that its directors have cancelled their bonus scheme for 2020, and are taking a 30% pay cut for the duration of the coronavirus lockdown.

Fairly intensive selling has now driven the FTSE 100 down by over 4%, down 235 points at 5434.

The banks are doing plenty of damage, along with other financial stocks such as Legal & General (-10%), Standard Life Aberdeen (-8.5%) , Aviva (-8.4%) and Prudential (-8.1%).

John Cronin of Irish investment bank Goodbody says that the UK banks have gone further than expected.

He told clients this morning:

It was heavier-handed than we thought on two fronts: i) we expected that both proposed dividends – and dividends for the next six months – would be suspended, not cancelled; and ii) we were surprised that the variable remuneration restrictions are wider in their application, i.e., they stretch beyond just the executive layer.

On the latter, hopefully, it will be a postponement rather than a cancellation for 2020 to the extent that banks show they can get through the worst of this crisis with their capital positions intact – which we believe they will.

Anyone whose held bank shares for the last decade or so may wonder why they bothered.

Owning HSBC stock has been a volatile ride -- but not one that has returned to the good old days before the financial crisis:

Richard Hunter, Head of Markets at interactive investor, says the UK banks may be doing the right thing for the economy....but at the expense of their shareholders:

“The announcement that banks will be suspending existing and future dividends and share buybacks ticks the boxes of moral duty and an additional capacity to lend, but from an investment perspective it removes a core plank of the case for buying bank shares.

The current yield of the UK banks, soon to evaporate, is testament to the fact that some are core portfolio holdings. Lloyds Banking has a dividend yield at present of 10.5%, Barclays 9.6%, Royal Bank of Scotland 4.4%, HSBC 9% and Standard Chartered 4.9%.

Oof! Shares in Britain’s banks have fallen heavily at the start of trading, after they collectively cancelled last year’s dividends and vowed not to pay any for this year.

HSBC have tumbled by 8%, closely followed by Lloyds (-5.8%), Standard Chartered (-5.8%), Barclays (-5.6%), and Royal Bank of Scotland (-3.5%).

European stock markets have fallen at the start of trading, with Germany’s DAX sliding by 3.2%, Spain’s IBEX down 2.2% and Italy’s FTSE MIB down 2.2%.

Britain’s FTSE 100 has dropped by 2.5%...but it’s a rocky open, as the bank shares haven’t actually traded yet (a bad sign...).

Tin hats to the ready.....

Keep an eye on UK Banks this morning after last nights announcement of dividend cuts.

HSBC down over 9% in HK

Standard Chartered down over 6%

Britain’s biggest banks are all cancelling their dividends, due to the economic shock of Covid-19.

It’s a blow to millions of small shareholders and pension holders, although it will make the banks stronger to handle the looming threat of loan defaults as the UK lurches into recession.

The cancellation of the 2019 dividends will give the banks an additional financial cushion worth nearly £8bn in total, as they are pushed to increase lending to businesses and households during the Covid-19 lockdown.

The decisions will be felt most immediately by Barclays shareholders who were set to receive more than £1bn on Friday. Barclays said the decision to scrap the 2019 payout was “in response to a request from the UK Prudential Regulation Authority and to preserve additional capital for use in serving Barclays’ customers and clients”.

Related: UK banks agree to scrap £8bn dividends amid recession fears

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

Good news! The worst quarter for the London stock market since 1987 is over.

Related: FTSE 100 posts largest quarterly fall since Black Monday aftermath

European Opening Calls:#FTSE 5476 -3.45%#DAX 9620 -3.18%#CAC 4264 -3.01%#AEX 467 -3.32%#MIB 16603 -2.63%#IBEX 6597 -2.78%#OMX 1440 -2.89%#STOXX 2700 -3.11%#IGOpeningCall

Related: Trump warns of 'painful two weeks' as officials predict up to 240,000 US coronavirus deaths

The final numbers don’t often change much from the flash but given the severity of the lockdowns in the second half of the month this will be one to watch.

We’ll also get a first look at Italy and Spain which given their more savage impact from the virus, these will be a big focus.

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