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FTSE 100 tanks over 2% as investors take flight due to coronavirus crisis

Britain's blue-chip index finished down nearly 174 points at 7,412, while FTSE 250 also plunged to end at 21,303 - down around 460 points

BT Group PLC -
London stocks joined other global markets to head south on Monday
  • FTSE 100 closes 174 points down
  • US markets tumble
  • Halma escapes lightly after announcing two acquisitions
  • Crude price sinks

5.10pm: FTSE 100 plunges

FTSE 100 index crashed while crude also tanked on Monday as investors were put off due to the China coronavirus crisis.

Britain's blue-chip index finished down nearly 174 points at 7,412, while FTSE 250 also plunged to end at 21,303 - down around 460 points.

The virus has now claimed the life of 81 in China, with 3,000 confirmed ill and the government has extended the Lunar New Year holiday to try and contain the outbreak and restrict travelling.

On Wall Street, the Dow Jones Industrial Average shed 419 points and the S&P 500 index lost over 46 points.

Brent crude shed 2.39%  to US$59.11  a dollar, while West Texas Intermediate, the US benchmark, fell 2.8%,  as oil traders fretted about a drop in demand from the globe's second biggest guzzler of the black stuff.

"China’s massive economy is mineral hungry, so traders are cutting their positions in mining as well as oil stocks, as the underling commodity markets are weaker today," said David Madden, analyst at CMC Markets.

"The view taken by traders is that China’s appetite for metals plus oil will fall as a result of the health situation."

BP (LON:BP.) shares dropped 1.88%, while Royal Dutch Shell (LON:RDSB) lost 2.2%. Glencore, (LON:GLEN), the world's biggest commodity trader, fell 3.97%, while Anglo American (LON:AAL) shed 4.67%.

Also, airlines and travel stocks suffered unsurprisingly. International Consolidated Airlines Group (LON:IAG) was the biggest loser on Footsie, flying 5.48% lower at 587p.

3.45pm: Attempted rally fizzles out

The Footsie’s attempted rally, always a bit half-hearted, has quickly run out of steam.

Entering the last hour of trading the top-shares index was down 173 points (2.3%) at 7,413.

With traders taking flight over the remorseless spread of the coronavirus, gold is, as usual, proving to be the investment of choice of the risk-averse.

On futures markets, the price of gold was up US$7 at US$1,579.

In contrast, investors are getting out of oil, as the price of Brent crude goes on the skids, diving 3.2% (US$1.93) to US$58.77 a barrel.

“Prior to the outbreak this week would have been notable for Mark Carney’s final meeting as Bank of England governor – an outing that could see the MPC cut interest rates – alongside the UK’s long-trailed withdrawal from the EU,” observes Connor Campbell at Spreadex.

“Instead it looks like those major macro events may end up as background noise to the market-tanking concerns surrounding the virus, and the potential impact it will have on the Chinese – and therefore global – economy,” he added.

Safety controls specialist Halma PLC (LON:HLMA) managed to avoid most of the damage on a day when it announced two acquisitions of companies that will fit into its Medical and Infrastructure Safety sectors respectively.

3.00pm: US indices plunge at the outset

US indices plunged, as expected, in the first half-hour of trading.

The Dow Jones was just under 400 points lower (1.4%) at 28,595. The broader-based S&P 500 was down 45 points (1.4%) at 3,250, as traders reacted to the deepening of the coronavirus crisis. In the UK, the FTSE 100 has at least stopped the rot, bottoming out at 7,393 and rallying to7,425, down 161 points (2.1%) on the day.

The FTSE 250 fared only slightly better, by virtue of the fact it has a lower proportion of constituents that are heavily dependent on the Chinese economy than the FTSE 100.

The mid-cap index was down 392 points (1.8%) at 21,372.

TI Fluid Systems PLC (LON:TIFS) mirrored the index with its 1.8% fall after a post-close period trading statement.

The manufacturer of highly engineered automotive fluid storage said revenues in 2019 were up by around 2% year-on-year on a constant currency basis.

1.15pm: US markets set to dive

In the view of some pundits, traders have been looking for a reason to bank profits and the coronavirus has provided it.

In lunchtime trading, the FTSE 100 was down 164 points (2.2%) at 7,421, ahead of what is expected to be a similarly precipitous fall for US benchmarks when trading starts in the USA in an hour or so.

Spread-betting quotes indicate the Dow Jones will open at around 28,536, down 454 points, while the S&P 500 is expected to open 50 points lower at 3,245.

“Global equities had started to looked vulnerable to a correction following their gain of close to 14% since early October, and the coronavirus has provided the catalyst for just such a setback,” suggested Rupert Thompson, the chief investment officer at Kingswood.

“The coronavirus has provoked comparisons with the SARS virus back in 2003 which ended up with close to 800 people losing their lives; however, while there are clear parallels, there are also significant differences. Mortality rates from the new virus are lower than with SARS but the coronavirus (unlike with SARS) is infectious before symptoms show up, substantially increasing the danger of it spreading rapidly. Even so, there is still a great deal of uncertainty over how serious the crisis will turn out to be and the World Health Organisation (WHO) has so far held off from calling a global health emergency,” Thompson reported.

“In assessing the potential economic and market impact – rather than the very evident human cost – the SARS outbreak is as good a starting point as any. That outbreak hit Chinese growth and the Chinese equity market significantly but the impact was short-lived with both rebounding within a matter of months. As for global equities, there was minimal impact at all,” he added, before hitting the reader with the sucker punch.

“This time round, the Chinese economy is much larger and much more connected with the global economy. The Chinese authorities have also imposed much more draconian measures to try and halt the virus. The short-term impact on the Chinese economy is therefore likely to be considerable – not that there will be any hard data released to measure this for a good couple of months,” Thompson observed.

12.05pm: Footsie off its lows after brief dip below 7,400

The death toll from the coronavirus has now risen to 81.

Associated Press reported that the southern island province of Hainan in the South China Sea reported its first fatality.

The FTSE 100 is down 178 points (2.3%) at 7,408, having briefly dipped below 7,400.

Not surprisingly, stocks deemed to have a significant dependency on Chinese economic activity are getting it in the next today, among them investment funds such as JPMorgan Chinese Investment Trust PLC (LON:JMC) and Fidelity China Special Situations PLC (LON:FCSS). The former was down 7.8% and the latter 7.1%.

Petra Diamonds PLC (LON:PDL) also had reason to grumble about China, although in its case it was the long-running US-China trade dispute that it was moaning about as its shares shed 9.3%.

“The company cited the US-China trade dispute as well as the unrest in Hong Kong for lower diamond prices. The group confirmed that demand ticked up in the second-quarter, and it is on track to achieve its full-year production target. It is unfortunate that external factors are hurting Petra, but at least their production seems to be under control,” said CMC’s David Madden.

Among the small caps, ITM Power PLC (LON:ITM) made waves for the wrong reasons, with a disappointing half-year report shaving 4.6% from the share price.

10.40am: Losses lengthen as British embassy in Beijing ponders evacuation option

Traders are spending as much time checking the World Health Organization’s web site as they are their trading screens this morning.

Just four blue-chips – NMC Health (LON:NMC), Polymetal International (LON:POLY), Halma (LON:HLMA) and National Grid (LON:NG.) – are on the up as the FTSE 100 plunged 169 points (2.2%) to 7,417.

“The situation in China is particularly bad as at least 80 people have passed away from the virus and there have been more than 2,700 confirmed infections. Stocks that are connected to China are feeling the pain this morning as traders are afraid the health crisis will curtail economic activity. Beijing have extended the Lunar New Year holiday in a bid to help tackle the problem,” reported David Madden at CMC Markets.

Britain’s embassy in Beijing is reportedly working on offering an option for British nationals to leave the Wuhan province, where the viral outbreak is at its worst.

Public Health England (PHE), meanwhile, believes the first case of the virus found in the UK is likely to come from somebody already in the country.

“Our view is that, although airports are important, the most likely place that we might find a case is somebody in the country already, and it’s absolutely critical that the public health service and the NHS are ready to diagnose that and are able to designate the person to the right facilities,” said Prof Yvonne Doyle, who is the medical director and director of health protection for PHE.

9.45am: UK mortgage approvals pick-up

UK mortgage approvals in December rose to 46,815 from 43,715 in November.

It was the highest number of mortgage approvals in a single month SINCE August 2015.

“The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year. The additional boost to approvals from the result of the general election still is to come,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

“The minimum feasible time between approaching a lender and receiving a mortgage offer is about two weeks, due to the time required for a surveyor to provide their report to the bank and detailed credit checks to be performed. So with the election on December 12 and Christmas holidays in the way, any evidence of a post-election pick-up in demand won’t be seen until January. All the evidence so far points to a further rise in demand after the election; the new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019,” he added.

“In addition, enquiries to estate agents in the month after the election were up 15% year-over-year, according to Rightmove. Accordingly, it looks set to be touch and go as to whether mortgage approvals by the main high street banks will exceed their post-2008 recession peak of 48.8K, recorded in January 2014, in the early months of this year,” Tombs said.

The FTSE 100 was down 165 points at 7,421.

9.20am: Friday's gains evaporate in a hurry

After spending Friday being phlegmatic about the threat posed by the coronavirus, investors have been channelling Corporal Jones from Dads Army today.

The FTSE 100 was down 140 points (1.8%) at 7,446.

“A weekend full of increasingly alarming headlines about jumping death tolls and known cases rising into the thousands – one expert has claimed there could be as many as 100,000 affected by the virus, a figure that dwarfs the official number – has sent the global markets reeling,” said Connor Campbell at Spreadex.

Miners and tourism-related stocks (airlines, hotels, cruise operators et al) are bearing the brunt of the sell-off, although the hardest hit blue-chip is Evraz PLC (LON:EVR); the maker of steel is down 5.1%.

Mining giants Anglo American plc (LON:AAL) and Rio Tinto plc (LON:RIO) are the worst-performing mining majors, down 4.6% and 4.2% respectively.

Fashion firm Burberry PLC’s (LON:BRBY) reliance on the Chinese market is reflected in its 4.3% fall.

Just two Footsie stocks are on the up and both, ironically, are normally basement dwellers.

Short-selling target NMC Health PLC (LON:NMC) is up 3.8% while academic textbooks publisher Pearson PLC (LON:PSON) was up 0.6%.

8.25am: Dire start to Monday

The FTSE 100 registered a triple-digit fall in early trade on Monday as the coronavirus took its toll on markets after worries about the spread of the illness haunted Asia earlier.

The index of blue-chips dropped 115 points to 7,471.25

The virus outbreak has affected 3,000 people so dar with 80 deaths recorded in and around Wuhan, the capital of China's Hubei province and centre of the outbreak.

While the area is in lockdown, the virus has spread internationally to countries such as the US and Thailand.

“This has the potential to really rattle markets, and with stock markets having been at or very near all-time highs before all this broke, this is a perfect selling opportunity,” said Neil Wilson, analyst at Markets.com.

“The problem is for most investors this is just not a risk event they are prepared for – a true black swan in the making. If politics is hard to grasp for most buysiders then virology is impossible – that is enough reason to see de-risking to happen; although I would still anticipate dips to be bought,” Wilson added.

Asia-focused stocks such as Prudential (LON:PRU) – down 7.9% - and Burberry (LON:BRBY) – off 5.5% - lead the Footsie losers’ list.

They were followed by the miners, which rely on the fast-expanding Chinese economy for much of their growth.

Proactive news headlines:

Nektan PLC's (LON:NKTN) decision to restructure and focus on providing its gaming platform to businesses is going well, with revenues growing strongly. The company said its business-to-business (B2B) division in the six months to the end of December saw revenues rise 153.1% to £787,000 from the preceding six months’ total of £311,000.

Kodal Minerals PLC (LON:KOD) has completed a feasibility study for the Bougouni lithium project in Mali and submitted its contents as part of a mining licence application to the relevant authorities. The study envisages a project with a minimum 8.5-year mine life producing an average of 220,000 tonnes of 6% spodumene concentrate per annum.

AFC Energy PLC (LON:AFC) has unveiled a commercialisation agreement with green tech firm HiiROC to produce zero-emission hydrogen fuel from natural gas. The AIM-listed firm said under the deal it will seek to obtain global preferential rights to integrate HiiROC’s plasma-based technology, which extracts hydrogen from methane and biomethane gas without emitting carbon dioxide, into its H-Power fuel cells.

Jersey Oil & Gas PLC (LON:JOG) is increasing its ownership of the undeveloped Verbier oil discovery through a deal with Equinor. The explorer, which presently holds 18% of the project, has agreed to buy a 70% interest in Licence P2170 from Equinor in return for contingent future payments, tied to potential successes and milestones.

H&T GROUP PLC (LON:HAT), the UK’s leading pawnbroker, has predicted that its profit before tax for 2019 will be at the top end of current market expectations. In a trading update, the firm said the strong performance was driven by a number of factors, including a 39% year-on-year increase in its pledge book.

SIMEC Atlantis Energy Limited (LON:SAE) has delivered an update on the performance of its MeyGen tidal power project in 2019, which saw the longest period of uninterrupted generation ever achieved for a multi-megawatt tidal turbine array. The sustainable energy firm said MeyGen has now exported 24.7 gigawatt hours (GWh) of predictable renewable electricity to the UK’s National Grid, with 13.8 GWh exported in 2019 alone, enough to power around 3,800 homes and generating revenues of £3.9mln.

Faron Pharmaceuticals Oy (LON:FARN) (FIRSTNORTH:FARON) said its precision immunotherapy will be used in women suffering ovarian cancer. In what’s called a second expansion cohort of the company’s phase I/II MATINS clinical trial, Faron drug Clevegen will continue to be assessed for safety and efficacy.

ECR Minerals PLC (LON: ECR) said its 100%-owned subsidiary Mercator Gold has been granted four exploration licences in the Yilgarn region of Western Australia. The licences form part of the Windidda project, which is considered to be prospective for komatiite hosted nickel, copper and platinum group elements, as well as orogenic gold.

OptiBiotix Health PLC (LON:OPTI) said its partner ALFASIGMA has launched a food supplement containing the cholesterol-reducing LPLDL probiotic strain developed by subsidiary ProBiotix Health. ALFASIGMA, which generates revenues of €1 billion, operates in 90 countries and has 3,000 employees globally, will market this first-of-its-kind nutraceutical probiotic in Italy for cholesterol reduction. The companies inked an exclusive commercial agreement in the summer of 2018.

Directa Plus PLC (LON:DCTA) is to invest €240,000 into an EU-sponsored initiative to develop a digital printing method for textiles using graphene. The €1mln GREEN.TEX project is designed to reduce the environmental impact of textiles production and also involves EFI Reggiani, the Italian subsidiary of global digital printing group Electronics For Imaging (EFI), and IBS Consulting.

Bluejay Mining PLC (LON:JAY) has been awarded a new mineral exploration licence surrounding the company's existing Kangerluarsuk zinc-lead-silver project in central west Greenland.  Bluejay intends to commence a maiden drill programme at the project later this year.

Block Energy PLC (LON:BLOE) has told investors that multi-rate production testing presently underway on the WR-38Z well at the West Rustavi field has so far shown peak results of around 550 barrels of oil equivalent per day (boepd). The peak production rate in the tests to date – following a clean-up period to stabilise the well and recover drilling fluids – comprised 300 barrels of oil plus 1.5mln cubic feet of gas per day.

Columbus Energy Resources PLC (LON:CERP) has marked the beginning of CO₂ gas injection in the enhanced oil recovery (EOR) project at the  Trinity Inniss field, Trinidad. The company said that it has so far injected the first tank of gas into the AT5X well at Trinity Inniss and over time it will now determine what impact this has for enhanced production in ‘offset’ wells to AT5X.

Shield Therapeutics PLC (LON:STX), the drugs developer focused on addressing iron deficiency, said 2019 was a year of material progress. In a trading update covering the year just ended the company flagged up the “broad label” approval of its lead drug, Accrufer, by the US Food and Drug Administration (FDA) last year and the positive results on the AEGIS-H2H study, which demonstrated Ferracru’s orally taken treatment was not inferior to Ferinject, the leading intravenous iron therapy.

Argo Blockchain PLC (LON:ARB) has appointed non-executive director Ian MacLeod as its executive chairman with immediate effect. MacLeod, who succeeds outgoing chairman Mike Edwards, also serves as corporate secretary and general counsel at telecoms and e-commerce-focused private equity investment fund Teligence. Meanwhile, Argo also said it is ahead of schedule to reach its goal of 17,000 installed machines by the end of the first quarter of 2020, with 15,730 cryptocurrency mining machines currently operating.

accesso Technology Group PLC (LON:ASCO), the premier technology solutions provider to leisure, entertainment, hospitality, attractions and cultural markets, said that, further to its announcement of 23 January 2020, Steve Brown has now been appointed as the new chief executive officer with immediate effect. The company also confirmed that Paul Noland has now resigned as chief executive officer and steps down from his role on the accesso board concurrent with Brown's appointment.

Arix Bioscience PLC (LON:ARIX) said a company it co-founded in 2018 has emerged from “stealth mode” after completing a Series A financing, that brings total committed funding to $50mln. It teamed up with US venture capital group Atlas Venture to create pre-clinical stage firm Quench Bio, which is working on the first anti-inflammatory and autoimmune drugs targeting a protein called Gasdermin D.

Nuformix PLC (LON:NFX), the pharmaceutical development company using cocrystal technology to unlock the therapeutic potential of approved small molecule drugs has announced the resignation of non-executive director John Lidgey from its board with effect from 31 January 2020. The group noted that Lidgey chaired Levrett PLC from inception through to the successful reverse merger with Nuformix in October 2017 and then remained on the board as NED. It said he has now decided it is time to move on to pursue new opportunities.

Blue Star Capital PLC (LON:BLU), the investing company with a focus on esports, technology and its applications within media and gaming, announced that Cairn Financial Advisers has been appointed as broker to the Company with immediate effect.

Oncimmune Holdings PLC (LON:ONC), a leading global immunodiagnostics group, said it will be holding a Capital Markets Update for analysts and investors alongside its half year results for the six months ended 30 November 2019, on Wednesday, 12 February 2020. The group said Adam Hill, its chief executive officer and Matthew Hall, chief financial officer, will host a presentation and conference call for analysts at 2:00pm GMT on the day of the results.

6.20am: Footsie called sharply lower

The FTSE 100 looks set to open almost 100 points lower with fears over the spread of the coronavirus driving sentiment.

In Asia, China's stock markets remained closed for the New Year holiday, but Japan’s Nikkei was down 1.8% as the outbreak appeared to be gathering pace.

Over the weekend the number of people that have contracted the virus rose to almost 3,000 with 80 fatalities. There are now multiple confirmed cases outside China, including the US and Thailand.

“Before the coronavirus situation broke out, stock markets in Europe as well as the US were in a strong position,” said David Madden, analyst at CMC Markets.

“In mid-January the FTSE hit its highest level since the summer, the DAX registered a record-high during the health crisis, and the major US indices set a series of record highs.

“Some traders were questioning the lofty valuations of stocks, so now the fear surrounding the health crisis has acted as an excuse to take money off the table.”

The unfolding problems in China had a knock-on effect for crude oil, with Brent down 2.3% at US$59.29. But Gold, a haven commodity in times of turmoil, was up 0.5% at US$1,586.30.

Later this week, the Bank of England makes its call on interest with traders pricing the prospect of a cut to base rates at roughly 50%.

The big scheduled corporate stories are expected to come on Thursday from the likes mof BT (LON:BT.A), Shell (LON:RDSA) and Diageo (LON:DGE).

Significant events expected on Monday: 

Finals: SThree PLC (LON:STEM), Global Invacom Group Limited (LON:GINV)

Interims: ITM Power PLC (LON:ITM)

Trading announcements: Petra Diamonds Limited (LON:PDL)

City Headlines: 

Financial Times

  • UK set to approve limited 5G role for Huawei
  • Deutsche Bank payments to Saudi royal adviser probed
  • Javid set to curb ‘entrepreneurs’ relief’ in Budget
  • Major hedge funds calculate cliff-edge Brexit fears overdone

Times

  • Cover blown on terms of Flybe’s loan
  • Court ruling keeps directors on the hook after prepack insolvency
  • UK car production slows to lowest since financial crisis
  • Boeing results set to be ‘absolute disaster’ with Max still on ground
  • Saudi £340mln bid for Newcastle United ‘in the balance’

Daily Telegraph

  • Business groups join trade talks amid fears it is ‘too little, too late’
  • Nuclear sector calls for new funding model
  • Turkish investor Cengiz stalks British Steel in case sale to Chinese bidder collapses

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