8th Apr 2020 08:55
(Alliance News) -Â London stocks opened lower on Wednesday, pulling back after two sessions of strong gains, with caution growing once more as daily Covid-19 deaths in Europe and the US jumped back up.
At the bottom of London's blue-chip index was Aviva, as it pulled its recommendation for a 2019 final dividend, while ASOS rallied on AIM amid a successful equity raise worth nearly GBP250 million.
The FTSE 100 index was down 67.61 points, or 1.2%, at 5,636.84 early Wednesday. The mid-cap FTSE 250 index was down 79.34 points, or 0.5%, at 15,489.62. However, the AIM All-Share index was up 0.9% at 719.07.
The Cboe UK 100 index was down 1.0% at 9,556.35. The Cboe 250 was up 0.1% at 13,375.23, and the Cboe Small Companies up 0.1% at 8,237.63.
In mainland Europe, the CAC 40 in Paris was down 1.5% while the DAX 30 in Frankfurt was down 0.7% early Wednesday.
After a few days of calm in financial markets, the mood started to turn as the UK reported 786 new deaths and New York state saw 731 in 24 hours, after Spain, France and Italy all recorded new surges in fatalities.
UK Prime Minister Boris Johnson remained in stable condition in intensive care London's St Thomas's hospital after being admitted on Monday, 10 days after being diagnosed with the virus.
Paris on Tuesday banned daytime jogging to keep people from bending anti-coronavirus lockdown rules as France breached 10,000 deaths.
But there were glimmers of hope in the statistics.
Spain said its downward trend in new infections and deaths was continuing and that increases in fatalities on Monday and Tuesday were the result of weekend deaths being tallied.
In New York, the epicentre of the US outbreak, Governor Andrew Cuomo said the state appeared be nearing the peak of its pandemic but urged New Yorkers to continue staying indoors.
Meanwhile, China reported no new deaths for the first time since the outbreak began in Wuhan in late December.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 2.1%. In China, the Shanghai Composite closed down 0.2%, while the Hang Seng index in Hong Kong is down 1.3%.
Against the yen, the dollar was quoted at JPY108.81, marginally down on JPY109.01 late Tuesday.
Sterling was quoted at USD1.2310 early Wednesday, soft on USD1.2325 at the London equities close on Tuesday. The euro traded at USD1.0855 early Wednesday, lower than USD1.0890 late Tuesday.
Gold was quoted at USD1,651.00 an ounce early Wednesday, lower than USD1,655.70 on Tuesday.
Brent oil was trading at USD32.48 a barrel early Wednesday, soft versus USD33.02 late Tuesday as traders await Thursday's OPEC+ meeting.
"Investors are wary if the US is going to join the production cut tomorrow, and this is what haunting traders now," said Naeem Aslam at AvaTrade.
"The US is likely to be willing to cut oil production if the crude price remains below USD35 or USD30. This is because, for most of the US oil producers, the breakeven price is higher than USD40. A 10 million barrels per day production cut isn't enough for the price to move higher than USD35. What we need here is a strong message, and that is 'whatever it takes'. If the US joins the OPEC plus in the production cut, the message will be strong for the industry," said Aslam.
At the bottom of London's FTSE 100 was Aviva, down 10% after the insurer said it no longer recommends the payment of a final dividend for 2019 due to the "unprecedented challenges" presented by Covid-19.
The insurer stressed that it remains well capitalised with strong liquidity, and will reconsider any payouts in the fourth quarter of 2020.
"It remains too early to quantify the impact of Covid-19 on claims expenses in our life and general insurance businesses, and the potential effect of capital markets and economic trends on our results. Given the change in the economic outlook, we are reviewing all material discretionary and project expenditure. We intend to provide an operational update for investors in the second half of May," said Aviva.
RSA Insurance was down 5.5% as it also suspended its recommendation for a 2019 final dividend.
"The board intends to recommence dividend payments as soon as it is prudent to do so, but it is too early to predict the quantum and timing of resumption which may therefore not be in time for the company's normal interim dividend schedule," said RSA.
Tesco shares were down 2.6% - recovering partially after a 5% down start - as it reported a fall in full-year profit, though it did boost its dividend.
For the financial year to February 29, revenue rose 1.3% to GBP64.8 billion, but pretax profit slumped 19% to GBP1.32 billion.
Cost of sales rose 1.6% to GBP60.18 billion from GBP59.22 billion, outstripping the rate of revenue growth, while finance costs rose 14% to GBP1.24 billion from GBP1.09 billion.
Like-for-like sales were down 0.6% for the year, dragged down by its central Europe operations, down 6.4%, while Asia operations suffered a 1.9% decline. In the UK & Ireland, though, like-for-like sales were up 0.2%.
The supermarket chain said it will pay a final dividend of 6.50p, reflecting the strength of the year's performance and its "robust liquidity and balance sheet". This brought the full-year payout to 9.15p, up 59% on last year's 5.77p.
Looking ahead, Tesco said it "would not be prudent" to provide guidance for the financial year just begun.
In the first few weeks of the coronavirus crisis, Tesco said "significant" panic buying - representing a 30% uplift in the UK - "cleared the supply chain of certain items". This has now stabilised and more normal sales volumes are being experienced.
Covid-19 is having a "material impact" on the business and it is incurring significant additional costs, particularly in payroll as employees are added to meet demand and cover workers who are absent and being paid.
"However if customer behaviour were to return to normal by August it is likely that the additional cost headwinds incurred in our retail operations would be largely offset by the benefits of food volume increases, twelve months' business rates relief in the UK and prudent operations management," said Tesco.
Michael Hewson at CMC Markets said: "Today's full-year numbers point to a business that is doing well, despite a disappointing Q4, the numbers don't include the recent pandemic sales surge, but nonetheless show a business in decent shape."
Peer J Sainsbury was down 4.1% and Wm Morrison Supermarkets down 3.2%.
On AIM, ASOS shares surged 39% to 2,161.88p. The online clothing retailer has raised GBP247 million via a placing of 15.8 million shares at a price of 1,560 pence each.
This was a slight premium to Tuesday's closing price of 1,559.50p.
The placing shares represent just under 19% of ASOS's existing issued share capital. ASOS said it consulted with its major shareholders prior to the placing and approximately 95% of the shares were allocated to existing shareholders.
The fashion retailer announced plans for the placing late Tuesday, as it also said profit for the first half of its financial year increased sevenfold on a double-digit rise in retail sales globally.
The stock was also boosted as Jefferies raised it to Buy from Underperform on Wednesday.
The economic calendar has minutes from the US Federal Reserve's emergency rate cut meeting on March 15 due out at 1900 BST.
"Over the last few weeks the US central bank has announced a number of policy moves to help support the economy through the current crisis, including cutting interest rates close to zero and unlimited QE. Today's minutes may give more insight of the reasoning behind those measures and the Fed's assessment of the potential impact on the economy of the pandemic. They will also be read for any signs of potential future actions," said Lloyds Bank.
By Lucy Heming;Â [email protected]
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