What to watch: EY probed over NMC Health audit, European manufacturing dives, oil and stocks under pressure

Oscar Williams-Grut and Tom Belger
·5 min read
LONDON, ENGLAND - OCTOBER 02: The Ernst & Young (EY) offices stand in 1 More London Riverside on October 2, 2018 in London, England. The government has called for a review of the British auditing industry after a series of scandals including the collapses of Carillion and BHS revealed serious failures in the auditing process.  The 'Big Four' accounting firms, which are Deloitte, PwC, Ernst & Young (EY) and KPMG audit the large majority of the UK's largest listed companies. (Photo by Jack Taylor/Getty Images)
Auditor EY is being investigated over its handling of accounts for former FTSE 100 hospital operator NMC Health. (Jack Taylor/Getty Images)

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

EY probed over NMC Health audit

‘Big Four’ auditor EY is being investigated over its handling of accounts for former FTSE 100 hospital operator NMC Health.

The Financial Reporting Council (FRC) said on Monday it had opened an investigation into EY’s 2018 audit of NMC Health. The investigation, which was opened on 15 April, is being handled by the watchdog’s enforcement division.

NMC Health fell into administration last month after a court challenge by lenders. The troubled Middle Eastern hospital operator had been part of the FTSE 100 until the start of 2020.

US short seller Muddy Waters raised questions about the company’s true level of debt in December. NMC vigorously denied the allegations and hired a former FBI director to investigate the claims.

The stock was suspended in February after the investigation turned up inconsistencies in its finances and the UK’s Financial Conduct Authority (FCA) opened a separate probe. Shares had lost over 60% of their value by the time trading was halted.

Investigators ultimately discovered $2.7bn (£2.2bn) of undisclosed debt, more than double what the company had previously announced. Other inconsistencies were also discovered and the company had trouble clarifying the ownership of shares among key investors.

EU factories' record slump sparks highest lay-offs since 2009

Factories across Europe have suffered their bleakest month in decades as the coronavirus crisis has wreaked havoc with supply chains, production and demand, new figures show.

A closely watched survey on Monday laid bare how the pandemic and state lockdowns to contain the virus have hammered manufacturing across the eurozone.

It shows manufacturing employment levels dropped in April at the fastest rate since 2009. Output, new orders, exports and purchasing activity all plunged at record rates, and confidence hit its lowest level on record.

The headline figure on the purchasing managers’ index (PMI) for eurozone manufacturers, published by data provider IHS Markit, came in at 33.4 in April, lower than a previous flash estimate. It marks the worst figure since the survey began in 1997, with a record number of firms reporting declining activity.

Oil prices under pressure as futures deadline looms

Oil prices were under pressure on Monday morning, as fears continue about oversupply in the market.

Crude futures (CL=F) were down 6.3% to $18.52 a barrel, while international Brent futures (BZ=F) were 1.8% lower at $25.96.

Crude futures are the standard measure of US oil prices and analysts said they sold off more sharply than the international benchmark due to concerns about storage capacity in the US.

“Investors are concerned about the storage issues despite the fact that we have seen some serious voluntary production cut by the US Shale oil producers over the last week,” said Naeem Aslam, chief market analyst at Avatrade, said. “An intense sell-off of West Texas Crude remains a possibility.”

Fears around storage are rising as the deadline for June futures contracts looms. June futures contracts expire on 19 May, at which point anyone holding them will have to take delivery of barrels of oil.

Stocks fall on 'risk of cold war' between US and China over coronavirus

European stock markets opened lower on Monday morning, amid continued tensions between the US and China over the COVID-19 pandemic.

Markets on mainland Europe had been closed on Friday and sold-off sharply on Monday morning as investor’s played catch up. The CAC 40 (^FCHI) opened down 3.4% in Paris and the DAX (^GDAXI) was 2.8% lower in Frankfurt. The Euronext 100 (^N100) was down 3.3%.

The FTSE 100 (^FTSE) opened down 0.7% in London. The market was open on Friday and had sold off over 2% after US president Donald Trump threatened to impose tariffs on China for its handling of the pandemic.

Analysts said Monday’s sell-off was driven by the continued tensions between the US and China over the novel coronavirus pandemic.

Overnight, Trump repeated his unproven claim on Fox News that the virus originated in a lab in Wuhan. Trump said China “made a horrible mistake” and “tried to cover it.”

“The risk of a cold war between the two nations seems to be building,” Deutsche Bank strategist Jim Reid wrote on Monday morning.

Hong Kong’s Hang Seng index (^HSI) shed 3.9%. The Shanghai Composite (000001.SS) in China and Japan’s Nikkei (^N225) were closed.

US futures were pointing to a lower open later today in New York. S&P 500 futures (ES=F) were off 0.6%, Dow Jones futures (YM=F) were down 0.7%, and Nasdaq futures (NQ=F) were 0.5% lower.

UK government to unveil rules for workplaces after lockdown

The UK government is preparing to unveil new guidance on how workplaces could safely reopen when it begins to ease the coronavirus lockdown.

Employers could be urged to keep lifts half-empty, stagger shifts and use physical screens where social distancing is not possible, according to reports.

Draft official documents seen by the BBC and the Financial Times set out how millions of workers could see their workplaces change in months to come.

Office workers may be urged to work from home where possible for several months more to prevent overcrowding on public transport.

Floor tape is likely to be used in many workplaces to encourage two-metre distancing between colleagues and between staff and customers.

Office canteens could remain closed, hot-desking restricted and face-to-face meetings are likely to be discouraged. Employers with more than five staff may have to draw up coronavirus risk assessments, a measure promoted by the Trades Union Congress (TUC).