18th Feb 2020 08:44
(Alliance News) - Stock prices in London opened lower on Tuesday amid heightened fears the deadly coronavirus will hurt company earnings after Apple warned of disruption to iPhone production in China.
In addition, Asia-focused lender HSBC Holdings was weighing on the UK's flagship equities index after reporting disappointing annual results.
The FTSE 100 stock index was down 44.95 points, or 0.6% at 7,388.30. The FTSE 250 was down 79.81 points, or 0.4% at 21,746.53, and the AIM All-Share was down 1.18 points, or 0.1% at 967.78.
The Cboe UK 100 index was off 0.8% at 12,487.20. The Cboe UK 250 was down 0.2% at 19,650.66, and the Cboe UK Small Companies was down 0.1% at 12,452.40.
In European equities, the CAC 40 in Paris was down 0.6% and the DAX 30 in Frankfurt down 0.7%.
The Japanese Nikkei 225 index closed down 1.4%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong closed down 1.4%.
iPhone maker Apple said disruption due to coronavirus had hit both production and demand in China, and the company was "experiencing a slower return to normal conditions" than planned.
"We do not expect to meet the revenue guidance we provided for the March quarter," it said in a statement, adding that worldwide iPhone supply would be "temporarily constrained" and demand in China had been affected. Apple had forecast revenue of USD63 billion to USD67 billion for the second quarter to March.
AvaTrade analyst Naeem Aslam said: "Market sentiment has tumbled once again due to a fresh revenue warning from Apple. The California-based company announced that it may not be able to meet its quarterly revenue due to the iPhone supply shortage and lower demand in China caused by the outbreak of coronavirus. Apple makes most of its products in China, and from a demand perspective, China was always an important area to impact its revenue.
"But for now, the tech giant's supply chain has been disrupted due to this virus and it will not be able to meet its quarterly revenue. The fact is that Apple already warned the markets when they announced their earnings earlier this year, and given that the fresh warning is still within the same range, it isn't really bad news."
In the FTSE 100, Severn Trent was among a handful of risers, up 0.8% after JPMorgan raised the water works to Neutral from Underweight.
At the other end of the index of London large-caps, HSBC Holdings was the worst performer, down 4.1% after the lender reported a fall in annual earnings as it announced a plan to slash 15% of its workforce.
HSBC is London's second largest company by market capitalisation after Shell.
For 2019, HSBC's pretax profit fell by 33% to USD13.34 billion from USD19.89 billion the year before, even as revenue rose by 4.3% to USD56.10 billion from USD53.78 billion.
The reported pretax profit fell way short of market expectations. Analyst consensus had HSBC achieving pretax profit of USD20.03 billion for the year.
The group profit performance was hurt by a total goodwill impairment of USD7.35 billion, with USD4.0 billion coming from HSBC's Global Banking & Markets division, and USD2.5 billion from Commercial Banking, reflecting lower long-term economic growth assumptions, and the planned reshaping of GB&M.
HSBC's return on tangible equity stood at 8.4%, down 20 basis points from 8.6% the prior year.
The bank plans to cut 15% of its global workforce as it embarks on a radical cost-cutting plan, the banking giant's interim chief said Tuesday.
"It's fair to say that our direction of travel will be to move the current headcount of 235,000 to be closer to 200,000 over the next three years," Noel Quinn told Bloomberg News in an interview.
Interactive Investor's Richard Hunter said: "For the moment, though, there remain more questions than answers as HSBC looks to overhaul its business in radical fashion. Quite apart from the economic challenges, there remains space at the top for a replacement chief executive, the search for whom is an additional distraction. The bank seems determined to target its unacceptably performing units but this will take time, courage and capital."
InterContinental Hotels Group was down 1.8% after the hotel operator reported a weak performance in its Greater China region.
IHG reported an 7% rise in revenue of USD4.63 billion in 2019 from USD4.33 billion in 2018. Pretax profit came in at USD542 million for 2019, up 12% from USD482 million in 2018. According to company-compiled analyst consensus, IHG was expected to post pretax profit of USD711.16 million for 2019.
Operating profit from reportable segments was USD865 million in 2019, up 4% from USD832 million in 2018. The consensus estimate had operating profit from reportable segments coming in at USD859.83 million for 2019.
Reportable segments exclude system fund results, hotel cost reimbursements and exceptional items.
IHG reported a decline in annual revenue per available room of 0.3% at group level, including a 0.2% slip in the Americas region and a sharper fall in Greater China of 4.5%. RevPar is a key metric in the hotel industry.
IHG said the performance was hurt by macroeconomic and geopolitical factors, increased supply growth ahead of demand in some markets, and the political protests that took place in Hong Kong.
Glencore was 0.5% lower after the commoditises house said annual profit was hurt by weak commodity prices and trade uncertainty, though it did beat market forecasts.
Swiss firm Glencore posted adjusted earnings before interest, tax, depreciation and amortisation of USD11.60 billion for 2019, 26% lower than the year before. However, according to company-compiled analyst consensus the market had forecast adjusted Ebitda of USD11.25 billion.
Glencore's adjusted earnings before interest and tax fell 55% to USD4.15 billion, while it posted a net loss attributable to equity holders of USD404 million after a profit of USD3.41 billion the year before.
The pound was quoted at USD1.2985 Tuesday morning, lower than USD1.3013 at the London equities close Monday.
The euro was at USD1.0832 on Tuesday, flat from USD1.0836 late Monday. Against the yen, the dollar was quoted at JPY109.69 Tuesday, lower than JPY109.91 late Monday.
Brent oil was trading at USD56.76 a barrel Tuesday morning, down from USD57.34 late Monday.
Gold was quoted at USD1,587.40 an ounce early Tuesday, firm against USD1,582.14 late Monday.
Financial markets in the US will reopen on Tuesday after being closed on Monday for the Presidents Day holiday.
The economic events calendar on Tuesday has UK unemployment data at 0930 GMT.
By Arvind Bhunjun; [email protected]
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