5th Mar 2020 17:08
(Alliance News) - Stocks in London ended lower on Thursday as investors once again fretted over the rapid spread of the coronavirus and the damage it could do to company earnings and the global economy.
The FTSE 100 index closed down 110.16 points, or 0.6%, at 6,705.43. The large cap index ended lower after three straight days of gains.
The FTSE 250 ended down 419.70 points, or 2.1%, at 19,323.13, and the AIM All-Share closed down 10.02 points, or 1.1%, at 875.83.
The Cboe UK 100 ended down 1.3% at 11,370.15, the Cboe UK 250 closed down 2.1% at 17,249.35, and the Cboe Small Companies ended down 0.9% at 11,556.37.
In Paris the CAC 40 ended down 1.9%, while the DAX 30 in Frankfurt ended 1.5% lower.
"It has been hard for anyone to quantify what's going on, and clearly for equity market investors it has been uncomfortable," said James Burns, co-manager of the Smith & Williamson Managed Portfolio Service.
"Rather than the start of a prolonged downturn, this feels more like a fourth quarter 2018 event. Investors would have to re-evaluate positions if the fundamentals shifted significantly, but as it stands this is possibly the wrong time to be panicking out of equities. Indeed, selling now, after the falls we've seen, might be wrong as a lot of the impact is already in the price," Burns added.
On the London Stock Exchange, Admiral group ended the best blue chip performer, up 2.4% after the motor insurer delivered what it said was record annual profit.
For 2019, Admiral posted a pretax profit for the year of GBP522.6 million, which it said is a record. This is 10% higher than 2018, and meets guidance given by Admiral in February of between GBP510 million and GBP540 million of pretax profit.
Insurance premium revenue increased by 5.8% to GBP2.20 billion, with Admiral's net insurance premium revenue up 5.6% to GBP709.4 million. Net revenue rose 7.1% to GBP1.35 billion. Admiral's customer numbers increased by 7% to just under 7 million, while UK insurance numbers rose 4% to 5.5 million and international customers climbed by 16% to 1.4 million.
Admiral is paying a 77.0 pence per share final dividend, which includes a 20.7p special dividend. The year's total is 140.0p, up 11% from the year before.
British American Tobacco ended up 1.5% after Bernstein raised Dunhill and Rothmans cigarette maker to Outperform from Market Perform.
At the other end of the large cap index, ITV ended the worst performer, down 12% after the broadcaster warned of lower advertising revenue.
For 2019, pretax profit fell 6.5% to GBP530 million from GBP567 million in 2018 as operating costs increased 6.1% to GBP2.77 billion from GBP2.61 billion. ITV reported a 3.2% rise in total group revenue to GBP3.89 billion from GBP3.77 billion in 2018. Broadcast total revenue was down 1.9% year-on-year to GBP2.06 billion as total advertising revenue slipped by 1.7% to GBP1.77 billion but was guided to fall 2%.
Looking ahead, ITV expects advertising revenue to be up 2% in the first quarter of 2020, though early indications suggest it will be down 10% in April. ITV noted it has seen travel advertising deferments relating to the coronavirus outbreak.
In addition, Evraz, Rio Tinto and BHP ended down 12%, 2.8% and 6.2% respectively. The commodity stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, Spirent Communications ended the best performer, up 17% after the communications equipment firm reported a double-digit increase in annual profit and revenue, driven by higher product demand and a better win rate with US defence contractors, leading to a payout raise.
For 2019, Spirent - which offers testing and analytics for networks and devices - posted a pretax profit of USD89.6 million, up 46% from USD61.2 million the year before. This was on revenue that grew by 13% to USD503.6 million from USD476.9 million.
Spirent said its growth resulted from continued momentum in the group's high-speed ethernet sales particularly in China, and a higher win rate for Global Navigation Satellite System defence projects in the US.
The group declared a final dividend of 3.45 cents per share, bringing the total payout to 5.39 cents, up 20% from 4.49 cents the year before.
Languishing at the other end of the midcaps, Capita closed down 36% after the outsourcer swung to an annual loss and warned more spending is required than originally thought.
In 2019, Capita said the reduction in revenue is now slowing, with second half revenue rising in four out of its six divisions year-on-year. The order book at the end of 2019 was GBP6.72 billion, down 5.4% on the same date a year prior. Capita's 2019 revenue declined by 6.1% to GBP3.68 billion, compared to a 7.3% yearly decline in 2018.
Adjusted revenue, taking into account accounting changes, fell 4% to GBP3.65 billion. Capita swung to a pretax loss of GBP62.6 million in 2019, following a GBP272.6 million pretax profit in 2018. Adjusted, pretax profit fell 2% to GBP275.0 million. The loss came after Capita booked a more than GBP300 million gain on a disposal in 2018.
Capita sees "modest organic growth" and sustainable free cash flow of GBP160 million in 2020, a figure it said was disappointing.
The pound was quoted at USD1.2922 at the London equities close, up from USD1.2812 at the close Wednesday, on hopes an interest rate cut from the Bank of England will not be imminent, as other major central banks slashed rates this week.
The Bank of England's rate decision is on March 26.
Sterling appreciated as incoming BoE Governor Andrew Bailey hinted the central bank would not be in a rush to cut interest rates at its policy meeting later this month.
Bailey, who is due to take over from Mark Carney on March 16, told the Parliament's Treasury Select Committee on Wednesday he is waiting for more evidence on the impact of the coronavirus outbreak before voting to cut interest rates.
"What we need is frankly more evidence than we have at the moment as to exactly how this is feeding through," said Bailey.
Further, investors are hopeful that at the UK budget on March 11, new Chancellor of the Exchequer Rishi Sunak will include some additional provisions to help offset the impact of coronavirus.
Analysts at RaboBank said: "The most obvious interpretation of Bailey's comments is that the MPC would like to see what the Chancellor of the Exchequer has to offer at the March 11 budget before making a decision as to any monetary policy change. The possibility of a brief delay in a BoE rate cut has allowed GBP to edge back to firmer levels.
"While fiscal policy is instrumental in providing a fine-tuned response to companies affected by a fall in demand or cash flow issues, monetary policy also has a major part to play in bolstering confidence and cheapening the cost of doing business. Given the risks that the BoE will cut rates this month, the pound's respite could be temporary."
The euro stood at USD1.1185 at the European equities close, up from USD1.1141 late Wednesday, after positive PMI data.
The latest eurozone construction purchasing managers' index signalled the fastest expansion in activity for a year, IHS Markit said.
The PMI rose to 52.5 in February, up from 51.9 in January. Any reading over 50 indicates expansion, and one below contraction.
"The latest rise was the quickest for a year, underpinned by accelerated growth in Germany and a slight rebound in Italy. On the other hand, France recorded a slower increase for the second month in a row, with the latest expansion only fractional overall," said IHS Markit.
By country, Germany's construction PMI rose to 55.8 from 54.9, with homebuilding the best performing category.
Against the yen, the dollar was quoted at JPY106.73, down sharply from JPY107.25 late Wednesday, trading at its lowest levels since October
Stocks in New York were firmly in the red at the London equities close as worries about the virus returned to the forefront.
The DJIA was down 2.4%, the S&P 500 index down 2.2% and the Nasdaq Composite down 1.8%.
California declared a state of emergency on Wednesday as thousands travelling aboard a cruise ship were held off the coast over fears of a new outbreak.
Eleven passengers and 10 crew members were potentially infected with the virus, according to California Governor Gavin Newsom.
Newsom declared a state of emergency to help his state cope with its first covid-19 death and more than 50 confirmed cases overall.
US bourses have experienced extreme volatility this week as investors have had to deal with the Federal Reserve and other central banks trying combat the economic effects with stimulus, along with the shifting outlook of the US 2020 presidential race with the surge of former vice president Joe Biden.
Elizabeth Warren - once a frontrunner in the Democratic contest for the White House - ended her campaign on Thursday, setting up a two-man duel between Joe Biden and Bernie Sanders.
"I'm suspending our campaign for president," the 70-year-old progressive lawmaker said in remarks to her campaign staff.
Brent oil was quoted at USD50.91 a barrel at the London equities close, sharply lower than USD52.17 at the close Wednesday, as OPEC gathered in Vienna, Austria for its 178th meeting.
The Organization of the Petroleum Exporting Countries said they would recommend a production cut of 1.5 million barrels per day as they seek to counter the slump in demand caused by the covid-19 outbreak.
However, the cartel has yet to win agreement from a Russia-led group of 10 additional allied countries that will join talks on a possible output cut on Friday in the Austrian capital.
OPEC's oil ministers agreed that they are willing to reduce their oil production by one million barrels per day, while asking the non-OPEC group for a cut of 500,000 bpd, for a total of 1.5 million bpd.
Any production cuts that are decided this week would come on top of of previous reductions that OPEC and its allies - jointly known as "OPEC Plus" - have been put in place in recent years to shore up prices.
Gold was quoted at USD1,658.87 an ounce at the London equities close, up from USD1,643.40 late Wednesday.
The economic events calendar on Friday has Germany factory orders at 0700 GMT and the US jobs report for February at 1330 GMT.
The UK corporate calendar on Friday has annual results from Irish lender AIB Group.
By Arvind Bhunjun; [email protected]
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