London midday: Stocks turn red as coronavirus concerns grow – ShareCast
At midday, the FTSE 100 was down 0.71% at 7,106.23, and the FTSE 250 was off 0.62% at 20,986.90.
Sterling remained stronger against its two major pairs, last rising 0.3% against the dollar to $1.2963 and 0.5% on the euro to €1.1966.
The FTSE 100 had opened marginally higher on Tuesday, after suffering its worst single-day points loss since August 2015 on Monday, as investors rushed to safety amid the outbreak.
Market participants were looking past the slowing rate of infection in China, as well as the relaxation of travel restrictions in places such as Beijing, and focusing on the rapidly-growing number of infections in countries including Italy and South Korea.
By Tuesday morning, seven people had died and more than 220 people were confirmed to be infected in Italy, as authorities there placed a number of localities on lockdown.
“That is not to downplay the seriousness of the coronavirus outbreak, given how little we know about it, but it could be argued that the reaction of governments to the outbreak in closing borders and restricting movement is actually making things worse, as well as sowing confusion and fear amongst their populations,” suggested CMC Markets’ chief market analyst Michael Hewson.
“For now, there appears little prospect that financial markets look likely to settle down in the short term, which means investors will have to get used to an extended period of uncertainty and volatility.”
Supply chain concerns were also emerging, with Associated British Foods warning that some clothing lines at its fast fashion brand Primark could face shortages later in the year if production capacity remained constrained in China.
AB Foods shares remained in the red, alongside peer Next, while Marks & Spencer was slightly higher.
Analysts were also looking at the wider effects of the outbreak in Italy, with Rabobank suggesting that a rate cut from the European Central Bank was now far likelier.
“Given the impossibility of the virus remaining an Italian problem – the global spread makes it clear that this is set to be an issue facing Europe as a whole – the market is only likely to price in a greater possibility of an ECB response,” Rabobank wrote.
“At the time of writing a 75% chance of a 10 basis point depo cut before the year is out was priced, versus a 52% [chance] on Friday.”
On the economic front, a report from EY suggested the UK’s smaller towns were set to fall further behind big cities over the next three years in terms of growth.
It revealed that small towns across the north east would be particularly affected by the widening of the inequality gap.
Gross value added (GVA) was due to grow at 2.2% annually on average in the largest cities, compared with 1.6% for towns.
“Encouragingly there appears to be a strong consensus that regional disparities need be addressed,” said EY’s chief UK economist Mark Gregory.
“But our forecast shows the scale of the task facing government in seeking to ‘level up’ the country and just how important the policy announcements in the budget will be.”
In equities, insurer Prudential was among the leading risers after it said it would hold talks with activist hedge fund Third Point over its demands that it spin off its Asian and US businesses.
Third Point has built a stake worth $2bn in Prudential to become its second largest shareholder and wrote to the UK company on Monday outlining position.
“Prudential proactively engages with shareholders with regards to group strategy and structure, and looks forward to commencing a dialogue with Third Point with regard to the views outlined in its letter,” the insurance giant said on Tuesday morning.
Bunzl continued its rally a day after it reported a 1% improvement in its revenue at constant exchange rates in its final results.
Petrofac was in the green, after posting “solid” operational performance in all of its businesses in its full-year results, even its business performance net profit fell 22% to $276m (£213.1m).
The FTSE 250 company said its reported net profit for the year ended 31 December totalled $73m post impairments and exceptional items, rising from $64m year-on-year.
On the downside, Meggitt tumbled after it said the suspension of Boeing’s 737 Max aircraft and the impact of coronavirus would slow revenue growth in 2020, even as it reported an 11% increase in 2019 profit.
Underlying pre tax profit for the year to the end of December rose to £370.3m from £334.8m as organic revenue increased 8% to £2.28bn. Statutory pretax profit rose 33% to £286.7m as reported revenue rose 9%.
Croda International was on the back foot after a fall in annual profit, as the specialty chemicals company’s sales were affected by a slower US personal care market and weak industrial demand.
Adjusted pre tax profit for the year to the end of December declined 2.8% to £322.1m from a year earlier as core sales slipped 0.2% to £1.27bn. Excluding currency movements profit fell 3.7% and sales dropped 2.3%.
Construction products supplier SIG was down, after it told shareholders that full-year results were expected to be in line with guidance, with underlying pre-tax profits of roughly £42m.
The company also revealed a major shakeup of its boardroom, with Meinie Oldersma resigning from the role of chief executive and Nick Maddock standing down as chief financial officer, both with immediate effect.
Travel and tourism plays were in the red as the coronavirus outbreak affected the appeal of their product, with TUI, Carnival and easyJet all falling in morning trading.
It emerged late in the morning that around 1,000 guests at a resort in Tenerife were now on lockdown, after a travelling Italian doctor tested positive for coronavirus.
FTSE 100 – Risers
Bunzl (BNZL) 2,087.00p 4.30%Pearson (PSON) 598.00p 3.17%NMC Health (NMC) 867.00p 2.22%Prudential (PRU) 1,446.50p 1.83%Informa (INF) 762.60p 1.01%Anglo American (AAL) 1,953.60p 0.56%Smurfit Kappa Group (SKG) 2,680.00p 0.30%Compass Group (CPG) 1,894.50p 0.21%WPP (WPP) 925.80p 0.15%Hikma Pharmaceuticals (HIK) 1,845.00p 0.14%
FTSE 100 – Fallers
Meggitt (MGGT) 566.40p -4.71%Croda International (CRDA) 4,754.00p -3.37%TUI AG Reg Shs (DI) (TUI) 743.80p -3.10%Carnival (CCL) 2,726.00p -2.82%Associated British Foods (ABF) 2,472.00p -2.79%easyJet (EZJ) 1,224.00p -2.63%Legal & General Group (LGEN) 293.40p -2.46%SSE (SSE) 1,619.00p -2.20%Kingfisher (KGF) 203.90p -1.92%British Land Company (BLND) 541.00p -1.85%
FTSE 250 – Risers
Pollen Street Secured Lending (PSSL) 884.00p 6.76%Tullow Oil (TLW) 38.14p 5.94%Plus500 Ltd (DI) (PLUS) 880.00p 3.53%Finablr (FIN) 77.50p 3.47%Hilton Food Group (HFG) 1,044.00p 2.35%Petrofac Ltd. (PFC) 366.00p 2.09%Vietnam Enterprise Investments (DI) (VEIL) 425.00p 2.04%TP ICAP (TCAP) 392.40p 1.61%PPHE Hotel Group Ltd (PPH) 1,910.00p 1.60%Spectris (SXS) 2,986.00p 1.08%
FTSE 250 – Fallers
SIG (SHI) 70.60p -15.40%Aston Martin Lagonda Global Holdings (AML) 364.00p -3.68%Restaurant Group (RTN) 118.60p -3.58%Playtech (PTEC) 319.30p -3.39%B&M European Value Retail S.A. (DI) (BME) 345.60p -3.30%Fisher (James) & Sons (FSJ) 1,824.00p -3.18%TI Fluid Systems (TIFS) 218.00p -3.11%Centamin (DI) (CEY) 148.05p -2.85%Essentra (ESNT) 380.80p -2.66%Crest Nicholson Holdings (CRST) 485.00p -2.65%