13th Feb 2020 07:44
(Alliance News) - Market sentiment has been rattled by a spike in coronavirus infection numbers after Chinese authorities changed their counting methods, with London stocks set to open lower on Thursday.
In early UK company news, Barclays posted a rise in 2019 profit but said it has become "more challenging" to hit its return on tangible equity target. Centrica slumped to a loss against a "challenging" backdrop, and Domino's Pizza said it has agreed to dispose of its loss-making Norwegian business.
IG says futures indicate the FTSE 100 index of large-caps to open 31.37 points lower at 7,503.00 on Thursday. The FTSE 100 closed up 34.93 points, or 0.5%, at 7,534.37 on Wednesday.
Another 14,840 people were confirmed to be infected with the virus in China, with the new cases and deaths by far the biggest one-day increases since the crisis began.
The new tally raised the death toll to 1,355 and the total number of nationwide infections of the virus – officially named COVID-19 – to nearly 60,000. In Hubei, where tens of millions of people are trapped as part of an unprecedented quarantine effort, 242 new deaths were reported on Thursday.
Hubei authorities said the huge increases were because they had broadened their definition for cases to include people "clinically diagnosed" via lung imaging. The commission said it looked into past suspected cases and revised their diagnoses, suggesting that older cases were included in Thursday's numbers.
Two top-ranking politicians overseeing the epicentre of the outbreak were also sacked, adding to questions over China's handling of the crisis, just hours after President Xi Jinping claimed "positive results" in battling the outbreak.
"If the basis for the recent stock market rally was a slowing infection rate of the coronavirus, then it may have happened on false pretences. The virus appears to be much more contagious than previously known," said Jasper Lawler, head of research at London Capital Group.
"The probability of a pandemic that could cause panic in markets has grown slightly," he continued. "Markets are already adjusting to the new reality with shares in Asia falling and havens like gold and US treasuries rising.
"However, losses are limited for now. If this new methodology means detection methods have improved and if the spike in the number of cases is a one-off, then a larger market sell-off might be averted," Lawler added.
In the US on Wednesday, Wall Street ended in the green, with the Dow Jones Industrial Average ending up 0.9%, the S&P 500 up 0.7% and the Nasdaq Composite up 0.9%.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite ended down 0.7%, while the Hang Seng index in Hong Kong is 0.3% lower.
Safe haven investments, such as gold and the Japanese yen, were higher early Thursday.
Gold was quoted at USD1,574.23 an ounce early Thursday, up from USD1,566.10 on Wednesday. Against the yen, the dollar was quoted at JPY109.81, down from JPY110.00.
Sterling was quoted at USD1.2949 early Thursday, down from USD1.2975 at the London equities close on Wednesday. The euro traded at USD1.0870 early Thursday, lower than USD1.0894 late Wednesday.
Brent oil was trading at USD55.60 a barrel early Thursday, flat on USD55.55 late Wednesday.
In early UK company news, Barclays said profit rose by a quarter in 2019 but warned hitting its return on tangible equity target has become more challenging.
Total income rose 2% to GBP21.63 billion, with net operating income broadly flat at GBP19.72 billion. Total operating expenses fell 5% to GBP15.43 billion, helped as litigation & conduct costs were reduced by 16% to GBP1.85 billion.
As a result, pretax profit rose 25% to GBP4.36 billion.
The bank's common equity tier 1 ratio strengthened to 13.8% in 2019 from 13.2% in 2018. Return on tangible equity improved year-on-year to 9.0% versus 8.5% in 2018. Barclays said it continues to target a RoTE above 10%.
"However, given global macroeconomic uncertainty and the current low interest rate environment, it has become more challenging to achieve this in 2020. Notwithstanding these headwinds, the group believes it can achieve a meaningful improvement in returns in 2020," the bank said of its RoTE target.
Barclays's total dividend for the year was raised to 9.0p per share from 6.5p.
"With continued strong capital generation and a CET1 ratio of 13.8%, we are pleased to be able to deliver improved returns to shareholders, and have declared a total dividend of 9 pence per share - up from 6.5p in 2018, and three times that of 2017," said Chief Executive James Staley.
"We expect future earnings to drive increased returns to shareholders, as we anticipate a significant reduction in charges related to litigation and conduct from this year onwards," Staley continued. "We intend to pay a progressive ordinary dividend supplemented with additional cash returns to shareholders, including share buybacks, as and when appropriate."
Barclays separately said Staley is being unanimously recommended for re-election at the bank's annual general meeting, having been judged to have been "sufficiently transparent" about the nature of his relationship with Jeffrey Epstein.
Epstein killed himself in a New York jail in August while awaiting trial on sex-trafficking charges.
The board will continue to "cooperate fully" with the Financial Conduct Authority and Prudential Regulation Authority investigation in the UK. The probe is into "Staley's characterisation to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company's response to the FCA".
British Gas parent Centrica said a "challenging environment" hit earnings in 2019.
Revenue fell to GBP22.67 billion from GBP23.30 billion in 2018, as the company sank to a pretax loss of GBP1.10 billion from a GBP575 million profit the year before.
The firm said it took a net exceptional charge before tax of GBP1.10 billion, including impairments of E&P and Nuclear assets, predominantly due to a reduction in commodity price forecasts, and restructuring costs of GBP356 million.
The full-year dividend was slashed by 58% to 5.0p, in line with July's rebasing decision.
"2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices. Against this backdrop Centrica delivered growth in customer accounts, higher net promoter scores, significant cost efficiencies in excess of our target, and full year adjusted operating cash flow and net debt within its target ranges," said Chief Executive Ian Conn.
"As expected, performance during the second half was much improved compared to the first half, demonstrating momentum as we enter 2020," he added.
Domino's Pizza Group said it has agreed to sell its Norwegian business to Pizza Holding and EYJA Fjarfestingafelag III, the existing minority shareholders in Domino's Norway.
Domino's Pizza will sell its 71% stake for consideration comprised of a nominal payment of NOK1 in cash and the transfer of the minority shareholders' interest in Domino's Sweden, which will result in Domino's Pizza owning 100% of the Swedish operations.
This transfer should facilitate an "an orderly exit" from the Swedish operations in due course, said Domino's Pizza, and "simplify" the disposal of the business.
In the event that shareholder approval for the deal is not obtained at an early May general meeting, Domino's Pizza will pay the minority shareholders a GBP1 million break fee. It said the deal had the back of brand owner Domino's Pizza in the US and of the full board of the UK company.
Domino's Norway made an underlying operating pretax loss of GBP6.6 million in 2018.
"Now we have agreed the transaction for Norway, we will focus on progressing transactions for our businesses in Sweden, Switzerland and Iceland. We are focused on securing the best possible terms for shareholders and are working closely with Domino's International throughout. We will update the market in due course," said Chief Executive David Wild.
The economic events calendar on Thursday has US inflation at 1330 GMT respectively.
By Lucy Heming; [email protected]
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