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StockBeat: The Rescue Isn't Coming Quickly Enough for Most Companies

By Geoffrey Smith -- We're at that point in the movie where the heroine is still tied to the railroad tracks, the train is fast approaching and the hero is still struggling to get there in time. 

Europe’s stock markets tanked again on Wednesday amid fears that increasingly extravagant government support measures ($1.2 trillion from the U.S., $400 billion from the U.K., $220 billion from Spain announced in the space of the last 24 hours) still aren’t keeping pace with the spread of the Covid-19 virus.

Evidence of the near-total shutdown of non-essential work continued to flood out Wednesday, with German automaker BMW suspending car production for four weeks across Europe and predicting a sharp drop in profits this year. BMW (DE:BMWG) stock fell 8.1%.

Airbus (PA:AIR) stock tumbled again, falling 13% amid fears that its biggest clients will end up bankrupt before they can take delivery of all the planes they’ve ordered in recent years. Suppliers Safran (PA:SAF) and Meggitt (LON:MGGT) also fell sharply.

HSBC, Europe’s largest bank, decided that this was no time to be without a permanent chief executive officer, and confirmed Noel Quinn in the position. Quinn has been implementing ever-more radical restructuring plans as interim CEO since John Flint was pushed out last year.

Meanwhile, Barclays (LON:BARC) warned that it was “very, very unlikely” to hit this year’s profit target pushing its shares down by 3.6%, somewhat oddly given that the news can hardly have been unexpected. HSBC (LON:HSBA) shares fell 3.7%.

Elsewhere in the banking sector, Germany’s regulators said they would release banks’ counter-cyclical capital buffer, following similar action from the Bank of England last week.

Deutsche Bank (DE:DBKGn) shares bounced 0.6% but Commerzbank (DE:CBKG) shares fell another 2.5% to a new all-time low, as markets priced in a growing likelihood that the state, which still owns 18% of the bank after bailing it out in the last crisis, will have to pump in more funds to support it.

The promise of government support has, however, had a positive effect on some retailers. Marks and Spencer (LON:MKS) and Kingfisher (LON:KGF) rose 11.7% and 7.1% respectively after the U.K. government promised retailers a 12-month holiday on business rates.  Supermarket chains J Sainsbury PLC (LON:SBRY) and WM Morrison (LON:MRW) also bounced smartly on the same news.

However, government support only goes so far. Inditex (MC:ITX) – the owner of Zara, Pull&Bear and Massimo Dutti – fell to a new seven-year low after booking a 287 million euro charge to absorb Covid-19 impacts. The company has closed thousands of stores worldwide, including all of its stores in home market Spain, in response to government health measures. Inditex stock fell as much as 12% before recovering to be down only 3.7% by 5:35 AM ET (0935 GMT).

The big winners of the day were in telecoms, with all the big players profited not only from the reliability of their cash flows, but also from the confidence that their heavy debt burdens will be largely underwritten governments even through a sharp recession. BT Group (LON:BT) shares rose 5.4%, while Telecom Italia (MI:TLIT) rose 4.9% and Orange (PA:ORAN) rose 4.5%.

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