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London open: Stockmarket rout extends as recession worries mount

By Alexander Bueso

Date: Friday 28 Feb 2020

London open: Stockmarket rout extends as recession worries mount

(Sharecast News) - There was no let up in the acute selling pressure on stocks at the end of the week, with investors asking themselves whether the spreading coronavirus would send the global economy into recession, which could entail further losses in stockmarkets over the coming weeks and months.

The FTSE 100 was called to open 216 points lower at 6,580.

"With the coronavirus having now breached the Chinese borders and spreading in some cases despite no clear connection to breakout areas, investors have finally accepted the reality of the situation," said Oanda senior market analyst Craig Erlam.

"And panicked. Suddenly the threat of a pandemic on global supply chains and the economy has set in and investors are fearing the worst, while not really knowing exactly what that is."

On Thursday, US markets closed sharply lower, with the S&P 500 registering its largest percentage point drop in eight and a half years and on course for its worst week since 2008 amid a spike in volatility.

According to Lori Calvasina at RBC Capital Markets, since the 1930s the median and average declines in the S&P 500 around recessions had been on the order of 24.0-30.0% from its most recent peak.

Economic survey data remained conspicuously resilient despite the spreading coronavirus.

Consultancy GfK's UK consumer confidence index edged up by two points to -7.0 in February (consensus: -8).

In parallel, mortgage lender Nationwide reported a 0.4% month-on-month to reach £216,092, for a 2.3% year-on-year rise in UK home prices (consensus: 2.3%), which was up from 1.9% in January and the strongest reading in 18 months.

On the corporate front, British Airways-owner IAG declined to provide financial guidance, telling shareholders that due to the "ongoing uncertainty on the potential impact and duration of COVID-19, it is not possible to give accurate profit guidance for FY 2020 at this stage."

In remarks on the BBC, IAG chief Willie Walsh said: "In the first three weeks of February the main impact was in Asia ... It looked like it was stabilising but earlier this week we had cases in Italy and we had a significant fall-off in demand in Italy and some other markets as well."

Elsewhere in the Travel & Leisure space, budget airline easyJet said it would cancel flights and introduce emergency cost cuts after the coronavirus outbreak caused a drop in demand for flights in and out of Italy and across Europe.

It said the fall in demand and load factors for Italy was significant and that business was weaker in other European markets.

EasyJet said it would cut administrative spending; freeze recruitment, promotion and pay; and postpone non-critical capital spending. It will also offer staff unpaid leave, stop non-mandatory training, press suppliers for price cuts and reorganise summer 2020 flights to maximise revenue when the market recovers.

Aircraft engine maker Rolls-Royce narrowed operating losses, but still took an exceptional charge of £1.36bn on its troubled Trent 1000 engine.

Reported group operating losses came in at £852m from a loss of £1.1bn a year earlier. Underlying operating profit rose 25% to £808m after a strong fourth quarter.

Market Movers

FTSE 100 (UKX) 6,543.65 -3.72%
FTSE 250 (MCX) 18,985.54 -4.03%
techMARK (TASX) 3,729.95 -3.80%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 619.60p 3.16%
Flutter Entertainment (FLTR) 8,154.00p -0.88%
HSBC Holdings (HSBA) 521.00p -1.57%
London Stock Exchange Group (LSE) 7,638.00p -2.20%
AstraZeneca (AZN) 6,984.00p -2.21%
Next (NXT) 6,072.00p -2.32%
Reckitt Benckiser Group (RB.) 5,700.00p -2.41%
SSE (SSE) 1,531.50p -2.48%
Sainsbury (J) (SBRY) 188.85p -2.68%
BT Group (BT.A) 135.64p -2.77%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 466.40p -9.51%
Scottish Mortgage Inv Trust (SMT) 534.50p -8.55%
TUI AG Reg Shs (DI) (TUI) 613.00p -6.53%
Mondi (MNDI) 1,524.00p -5.90%
Smith (DS) (SMDS) 316.20p -5.72%
Barratt Developments (BDEV) 725.00p -5.70%
Standard Life Aberdeen (SLA) 269.10p -5.55%
Auto Trader Group (AUTO) 495.50p -5.44%
Informa (INF) 652.60p -5.42%
Ocado Group (OCDO) 1,023.00p -5.32%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 904.60p 3.69%
Finablr (FIN) 57.80p 1.05%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 110.60p 0.36%
Vivo Energy (VVO) 100.60p 0.20%
G4S (GFS) 164.65p 0.03%
Contour Global (GLO) 179.00p 0.00%
EI Group (EIG) 284.60p 0.00%
Millennium & Copthorne Hotels (MLC) 687.00p 0.00%
Daejan Holdings (DJAN) 8,010.00p -0.12%
NextEnergy Solar Fund Limited Red (NESF) 115.75p -0.64%

FTSE 250 - Fallers

Premier Oil (PMO) 75.94p -10.43%
Aston Martin Lagonda Global Holdings (AML) 322.80p -9.27%
Smithson Investment Trust (SSON) 1,136.00p -8.39%
Aberforth Smaller Companies Trust (ASL) 1,198.00p -8.27%
Hochschild Mining (HOC) 166.80p -8.15%
William Hill (WMH) 144.75p -8.10%
HGCapital Trust (HGT) 229.00p -8.03%
Worldwide Healthcare Trust (WWH) 2,810.00p -8.02%
Henderson Smaller Companies Inv Trust (HSL) 863.00p -7.60%
Baillie Gifford Japan Trust (BGFD) 648.00p -7.30%


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