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What to watch: Oil price crash will cost Shell $800m, more companies axe dividends, and stocks rise

·Senior City Correspondent, Yahoo Finance UK
·4 min read
18 March 2020, Brandenburg, Potsdam: A truck with semi-trailer of the company Shell. Photo: Soeren Stache/dpa-Zentralbild/dpa (Photo by Soeren Stache/picture alliance via Getty Images)
A truck with semi-trailer of the company Shell. (Soeren Stache/picture alliance via Getty Images)

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

Oil price crash will cost Shell $800m

The collapse in the price of oil will cost Royal Dutch Shell (RDSB.L) between $400m and $800m in the first quarter alone, the company said on Tuesday.

Shell said it would book the impairments on its balance sheet following the recent slide in oil prices. A slump in demand, driven by coronavirus, and a glut of supply, sparked by a price war between Russia and Saudi Arabia, has seen the price of Brent oil (BZ=F) fall by around 60% since the start of the year to trade at around $22-23 per barrel.

“Price sensitivity at Shell Group level is still estimated to be $6 billion per annum for each $10 per barrel Brent price movement,” Shell said in its trading update.

Shell also said oil and gas production in the first three months of the year was set to be below production levels last year.

More companies axe dividends

The glut of companies cancelling dividends due to coronavirus continues, with several more joining the list on Tuesday.

Advertising giant WPP (WPP.L), house builders Galliford Try (GFRD.L) and St Modwen’s (SMP.L), soft drinks group Nichols (NICL.L), and roadside assistance specialist AA (AA.L) all cancelled or suspended dividends on Tuesday. All said it was prudent to conserve cash in light of the uncertainty created by the COVID-19 pandemic.

Dividends worth £5.5bn have now been cancelled or suspended by UK-listed companies since the start of the year, according to Russ Mould, investment director at stockbroker AJ Bell. Of those, £5.4bn-worth were cancelled in March alone.

UK growth flatlined before COVID-19 hit

UK economic growth came in at 0% in the final three months of 2019 according to final figures, meaning that the country’s economy flatlined even before the coronavirus crisis hit.

The Office for National Statistics (ONS) confirmed on Tuesday that the country’s gross domestic product (GDP) was flat in the final quarter of the year compared to the previous three months, unrevised from its first quarterly estimate.

Compared with the same quarter in 2018, the UK economy expanded by 1.1% in the final three months of the year, the ONS said.

Stocks climb

European stocks rose on Tuesday after stronger-than-expected industrial data from China raised hopes that the world’s second-largest economy could stage a swift recovery from the coronavirus crisis.

The pan-European STOXX 600 index (^STOXX) climbed by around 1.9%. London’s FTSE 100 (^FTSE) rose by around 1.8%.

Germany’s DAX (^GDAXI) was up by almost 2.5%, while France’s CAC 40 (^FCHI) was 1.8% in the green.

A closely watched official survey of Chinese factories suggested that an easing of restrictions in the country has prompted a rebound, with the manufacturing sector’s purchasing managers’ index (PMI) reading coming in at 52.0 in March.

Record grocery sales in the UK

A record £10.8bn ($13bn) was spent on groceries in the UK in March, as fears about the spread of novel coronavirus and a possible lockdown drove people to stock up.

Market research firm Kantar Worldpanel said on Tuesday 31 March that grocery sales in the UK had risen by 20.6% over the last four weeks. The unusually large growth makes March the biggest month on record for grocery sales.

“It has been an extraordinary month and social distancing measures have had a profound impact on all our daily lives – from the way we work and socialise, to how we shop and care for our loved ones,” said Fraser McKevitt, head of retail and consumer insight at Kantar.

Domino’s names new CEO

Domino’s (DOM.L) has appointed the former senior vice-president of international of Royal Caribbean Cruise Line as the pizza delivery chain’s new top boss.

The group said in a statement that Dominic Paul will be chief executive officer designate from 6 April and will join the board as CEO on 1 May, when his predecessor David Wild retires.