Portfolio

London midday: Stock selloff continues heading into the weekend

By Alexander Bueso

Date: Friday 28 Feb 2020

London midday: Stock selloff continues heading into the weekend

(Sharecast News) - There was scant let up in selling pressure on global stockmarkets on Friday, with investors wary of what news headlines the weekend might bring, even as they worried that a global economic recession might be on the cards.
A key manufacturing survey was due out in China on Saturday and analysts believed it would reveal a very sharp drop in activity, while South Korean officials were expected to release the results of testing on the members of a Shincheonji church which it was thought might harbour a large number of cases.

"Do you want to be long going into the weekend, even at these lower prices, when any number of worrying headlines may potentially hit the screens?," analysts at Rabobank mused.

Overnight, the World Health Organisation said that the caseload of coronavirus cases outside of China had increased by 746, versus an increase of 459 the day before, amid news of a first case in Nigeria and of the death of Iran's ambassador to the Vatican.

Against that backdrop, as of 1150 GMT, the FTSE 100 was down by 3.4% to 6,565.28 and the FTSE 250 was 2.73% lower to 19,242.51.

The top flight index was also pushing further into so-called "correction" territory, just like its peers around the world, having broken below the threshhold of a 10% drop from its most recent peak the day before.

Regarding the potential impact of the COVID-19 virus, in an interview with Sky News, Bank of England, Mark Carney, said that: ""It's too early to tell what it means for the UK, or its magnitude.

"But the most important thing is to make sure the system is functioning. We're very confident about that, and we're on top of it."

Some traders however disagreed.

"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.

As an aside, according to Reuters Breakingviews, three out of the four flu pandemics over the past century were followed soon after by economic recessions in the US.

UK economic survey data remained conspicuously resilient despite the spreading coronavirus, although the same could not be said of Japanese unemployment data released earlier.

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 made to 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) 6,565.66 -3.40%
FTSE 250 (MCX) 19,246.14 -2.72%
techMARK (TASX) 3,746.17 -3.39%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 632.60p 5.33%
Sainsbury (J) (SBRY) 194.30p 0.13%
easyJet (EZJ) 1,108.00p -0.18%
Morrison (Wm) Supermarkets (MRW) 169.60p -0.26%
DCC (DCC) 5,550.00p -0.79%
BT Group (BT.A) 138.14p -0.97%
Carnival (CCL) 2,370.00p -1.13%
Flutter Entertainment (FLTR) 8,124.00p -1.24%
SSE (SSE) 1,547.00p -1.50%
Tesco (TSCO) 227.50p -1.52%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 612.60p -6.59%
Smith (DS) (SMDS) 314.40p -6.26%
Scottish Mortgage Inv Trust (SMT) 549.00p -6.07%
BHP Group (BHP) 1,401.60p -5.92%
Polymetal International (POLY) 1,221.50p -5.64%
Mondi (MNDI) 1,531.50p -5.43%
Ocado Group (OCDO) 1,022.50p -5.37%
International Consolidated Airlines Group SA (CDI) (IAG) 488.40p -5.24%
Hikma Pharmaceuticals (HIK) 1,812.50p -5.10%
National Grid (NG.) 988.00p -4.98%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 933.20p 6.97%
Finablr (FIN) 59.15p 3.41%
G4S (GFS) 169.20p 2.79%
LXI Reit (LXI) 130.40p 2.68%
Fisher (James) & Sons (FSJ) 1,718.00p 2.26%
Helios Towers (HTWS) 125.40p 1.79%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 111.80p 1.45%
Watches of Switzerland Group (WOSG) 339.00p 1.19%
Euromoney Institutional Investor (ERM) 1,046.00p 0.97%
Essentra (ESNT) 351.20p 0.92%

FTSE 250 - Fallers

Premier Oil (PMO) 76.00p -10.36%
IWG (IWG) 349.40p -9.01%
Aston Martin Lagonda Global Holdings (AML) 324.10p -8.91%
Hochschild Mining (HOC) 166.30p -8.43%
IP Group (IPO) 67.90p -7.99%
Jupiter Fund Management (JUP) 301.00p -7.75%
Petrofac Ltd. (PFC) 307.90p -6.98%
HGCapital Trust (HGT) 232.00p -6.83%
Fresnillo (FRES) 639.20p -6.71%
Energean Oil & Gas (ENOG) 646.00p -6.38%

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