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FTSE 100 closes down 1.3% as January ends on sour note

Britain's blue-chip benchmark index finished down around 95 points lower, or 1.3%, at 7,286, going below 7,300 for the first time in seven weeks

SSE PLC -
FTSE 100 closed lower on the day as coronavirus fears are still sending traders fleeing
  • FTSE 100 closes down on day and week
  • Aston Martin gets turbo boost
  • US stocks in the red

5.10pm: FTSE 100 closes down 95 points

FTSE 100 index closed decidedly in the red on Friday as January ended on a sour note and health fears continue to weigh on global markets.

Britain's blue-chip benchmark index finished down around 95 points lower, or 1.3%, at 7,286, going below 7,300 for the first time in seven weeks. Over the week as a whole, Footsie lost 3.9%.

The FTSE 250 shed over 148 points on the day to close at 21,143.  Over on Wall Street, the Dow Jones lost 382 points, while the S&P 500 shed around 40 points and the Nasdaq plunged 86 points.

Chris Beauchamp,  chief market analyst at online trader IG noted that few people would have suggested that  a ‘major virus outbreak’ would have been seen as a big risk for markets in 2020.

"This underlines a key point about investing – it is rarely the obvious things, like trade wars or impeachment that cause rapid losses," he said.

"These can be navigated  relatively safely, but events like the coronavirus take time to process. It is unlikely to be a major top, but it has sparked off a pullback that could run for a while yet, particularly if nervousness and unease is reflected in economic reports and earnings outlooks."

3.15pm: Footsie hits a 7-week low

Hopes of a bright end to a bleak week were quickly dashed today and the Footsie has spent the bulk of the day in decline.

The index of leading stocks was down 80 points at 7,302, which was barely above its low point for the day.

Away from the blue-chips, telecoms services provider Toople PLC (LON:TOOP) toppled after it announced an acquisition and a heavily discounted share placing.

The shares, which closed last night at 0.16p, plunged to 0.1p after the company funded the acquisition of DMSL, a company that provides unified communication services in the UK, by placing shares at 0.1p each.

Going the other way was luxury cars maker Aston Martin Lagonda Global Holdings PLC (LON:AML), which rose 19% to 480.2p after a rescue deal was announced.

Canadian billionaire and F1 backer Lawrence Stroll is leading a consortium of financial heavyweights in a bail-out of the company, which has struggled since floating on the stock market later in 2018.

“The news that Canadian billionaire Lawrence Stroll will acquire a big stake in the business, which in combination with a rights issue will give the company a £500m lifeline, is a reminder that the Aston Martin brand still has some value," said AJ Bell’s Russ Mould.

“Stroll is planning to use the Aston Martin name, with all its James Bond cachet, for his F1 team. This element of the transaction also implies a long-term commitment to the business.

“Having been no stranger to bankruptcy during its 106-year history, the company’s board will have been fully aware of the stakes following a disastrous 2019 which made a mockery of the company’s £4bn valuation at IPO.

“Having secured some breathing space the firm will look to address its problems by limiting production to prioritise demand over supply and support prices, fully launching its SUV model DBX and slashing costs,” he added.

2.35pm: Dow takes a bath early doors

The Dow Jones industrial average took a bath at the start of trading as investors remain perturbed about the coronavirus.

The benchmark US index plunged 200 points to 28,654 while the broader-based S&P 500 opened its account at 3,271, down 13 points.

“The worrying thing is how much worse the numbers [of reported virus cases] could look when the markets reopen next week, given just how rapidly they're rising. Huge efforts are being made to contain the virus and yet, the numbers are already massive.

“It's clear there's going to be an economic price as well as various businesses rightfully put safety ahead of profit. It's just extremely difficult to quantify what that will be at this moment as we don't know how long it will last and how much worse it will get. Companies are seeing their share prices take a beating though as investors fear the worst and hope for better,” said Craig Erlam, the senior market analyst at Oanda Europe.

“Oil prices have been extremely vulnerable to the outbreak, as highlighted in the near-20% plunge over the last few weeks. Brent has broken back below $60 a barrel and finds itself trading around October levels when we were talking about OPEC+ cuts. The cartel stands ready to act again if necessary but may accept the short-term pain for now on the expectation that the economic consequences won't be as bad as people fear and price will bounce back to more acceptable levels on its own,” he added.

So, all is doom and gloom, and yet gold – the go-to investment for risk-averse investors – is down US$2 to US$1,587.20 an ounce.

In the UK, the FTSE 100 is down 56 points (0.8%) at 7,326, partly because index heavyweights BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB) have been laid low by the weak oil price; both are around 1.8% lower.

Cruises operator Carnival PLC (LON:CCL), up 1.0%, was deriving some succour from the weaker oil price, however.

12.45pm: Recovery continues but at glacial pace

US markets are expected to open lower this afternoon, as the coronavirus outbreak continues to rattle global markets.

Spread betting quotes suggest the Dow Jones will start at around 28,740, 119 points below last night’s close. The S&P 500 is expected to open around 5 points lower at 3,279.

In the UK, the FTSE 100 has been trimming the morning’s losses in the afternoon session. The index is now down 46 points at 7,335.

British Airways owner International Consolidated Airlines Group defied the trend with a 0.2% rise to 573.6p, clawing back some of the losses suffered since it became obvious that the health scare in China would hit travel in the region.

The company announced this morning that Luis Gallego, who will take over as the company’s chief executive officer on 26 March, will receive a basic salary of £820,000, plus a 12.5% of basic salary pension contribution, while he will have the opportunity to triple his salary each year via the incentive plan.

11.15am: Footsie off the floor

Reflecting sterling’s surrender of some of its early gains, the Footsie has dragged itself off the floors and onto its knees.

The FTSE 100 was down 58 points (0.8%) at 7,323, about 15 points below its lowest point of the day so far.

“The FTSE 100 has fallen to a fresh seven week low amid growing concerns about the coronavirus emergency. The London equity benchmark has a relatively large commodity sector, so the aggressive move lower in base metals and energy recently has hit mining and energy stocks hard, hence why the FTSE 100 is underperforming in comparison to its Continental counterparts. Stocks in mainland Europe are broadly lower too as the deepening health crisis continues to chip away at market confidence,” summarised David Madden at CMC Markets.

Among the midcaps, telecoms and internet service provider Talktalk Telecom Group PLC (LON:TALK) defied the market trend by rising 1.8% on the back of its fiscal third-quarter update.

The company added 148,000 fibre broadband clients in the third-quarter.

On what is being called Brexit Day in some quarters, it was announced that real gross domestic product in the Eurozone rose by 0.1% quarter-on-quarter in the fourth quarter from an upwardly-revised 0.3% gain in third quarter; the 0.1% rise was below the consensus forecast of 0.2%.

 

10.00am: House purchase mortgage approvals rise sharply in December

House purchase mortgage approvals rose to 67,200 in December, from 65,500 in November, which was well above the consensus forecast of 65,600.

Net consumer credit rose by £1.2bn in December, which was above the consensus forecast of £900mln.

“December’s money and credit data show that monetary conditions already are loose enough, without the MPC needing to follow through with a reduction in Bank Rate,” suggested Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

Talking of the bank rate, yesterday’s decision not to go for a cut continues to put a floor under the pound on foreign exchange markets and although sterling has come off top in the second half of the morning, that has not stopped the FTSE 100 from hitting a new low for the day of 7,316, down 66 points (0.9%).

9.40am: Sterling's rally puts a crimp on the Footsie's style

The pound is enjoying another good day on foreign exchange markets after yesterday’s base rate decision but that is putting a crimp on blue-chips.

The FTSE 100 index made a brief attempt at a rally at the outset but quickly moved lower and is now down 24 points (0.3%) at 7,359.

Hargreaves Lansdown PLC (LON:HL.), down 4.5%, leads the retreat after its interim results underwhelmed. Net new business of £2.3bn in the second half of December was below the market’s expectations.

Utilities provider SSE PLC (LON:SSE) was down 0.1% - marginally outperforming the market – after its trading statement.

The cash-rich company, a favourite of income investors, reiterated its commitment to its existing dividend plan for the next five years but its new reliance on renewable energy has seen output fall short of its expectations at its wind farms and hydro stations due to unhelpful weather conditions.

8.50am: Dull start to Brexit Day

The FTSE 100 failed to make the anticipated Brexit Day headway as the City’s preoccupation with the coronavirus continued.

The index of UK blue-chips opened down 22 points at 7,359.55 

The World Health Organisation categorising the outbreak as a global public health emergency and the foreign evacuation of Wuhan added to the jitters.

Overnight we had bumper earnings from Amazon, while in China manufacturing data was in line with expectations, though the performance of the sector could best be described as insipid.

The main casualty on the Footsie was Hargreaves Lansdown (LON:HL.), which fell 5%. While the investment group reported a rise in first-half profits, new business fell. It also incurred a £2.3mln hit from the Woodford debacle.

On the move higher was Intercontinental Hotels Group (LON:IGH), which recovered 2.7% of the value it has lost in the wake of the coronavirus-inspired mark-down of travel stocks.

British Airways owner IAG (LON:IAG) and cruise firm Carnival (LON:CCL) were also beneficiaries.

No doubting the day’s big riser – Aston Martin (LON:AML), which secured a £500mln bail-out. Stock in the luxury car maker jumped 28% early on.

Proactive news headlines:

Vast Resources PLC (LON:VAST) has received net cash proceeds of US$6.39mln from the drawdown of the first tranche of a loan from Atlas Capital. “We are pleased that Tranche 1 of the Atlas Capital Markets facility has been achieved and with the opportunity that this unlocks,” said Vast chief executive Andrew Prelea.

OptiBiotix Health PLC (LON:OPTI), the life sciences business developing compounds to tackle obesity, high cholesterol, diabetes and skin care, and Agropur Inc. have announced the launch of SlimBiome in the North American market. The move follows the announcement on 24 June 2019 that OptiBiotix had granted Agropur an exclusive license to manufacture, supply and distribute SlimBiome weight management technology in the USA, Canada and Mexico.

Sativa Group PLC (LON:SATI) has signed a deal to distribute its Goodbody Botanicals range of cannabidiol (CBD) products to pharmacies across the UK. The deal with pharmaceutical, medical and healthcare product distributor Alliance Healthcare will provide access to over 10,000 high street retailer customers, Sativa said.

EQTEC PLC (LON:EQT) highlighted significant progress with its recently refined strategy under its new chief executive, David Palumbo, over the last four months. The technology solutions provider for waste gasification to energy projects has continued its focus on three key verticals, namely the recovery of clean energy from biomass; the elimination of waste streams in the agri-food and industrial sectors; and elimination of municipal solid waste and refuse-derived fuel waste streams.

Frontier IP Group PLC’s (LON:FIPP) portfolio firm, Exscientia, has begun phase 1 clinical trials of DSP-1181, the world’s first drug created by artificial intelligence (AI). The drug, created as part of a joint development agreement with Japanese firm Sumitomo Dainippon Pharma, is designed to treat obsessive compulsive disorder (OCD).

Scancell Holdings PLC (LON:SCLP) said it is increasing the number of clinical sites as it recruits patients to a UK phase II trial for its lead drug, SCIB1 for the skin cancer melanoma. The update was provided alongside the firm’s interim results, which charted a busy period for the immunotherapies specialist, one in which it brought on board a new major shareholder, the Vulpes Life Science Fund.

Ashley House PLC (LON:ASH), the health and housing property partner, said it has made good progress with its affordable housing strategy. Its F1 Modular unit has recently achieved practical completion on six affordable homes for Corby Borough Council and also on a disabled living scheme in Peterborough for a specialist care home operator.

Open Orphan PLC (LON:ORPH) has unveiled plans to raise £5mln that will be used to accelerate the growth of the pharma services group following its merger with hVIVO. A total of £1mln has already been committed to the subscription portion of the share issue, with the remainder coming via a placing of stock with “institutional and other” investors. Chairman Cathal Friel’s Raglan Capital has agreed to unwrite a £2.5mln portion of the fundraiser.

Regency Mines PLC (LON:RGM) told investors it has now rebranded its ‘Energy Storage’ division to ‘Flexible Grid Solutions’. It also confirmed board approval progress for the first project to financial close, and added that first revenues are expected by the end of 2020. The first project is located in Southport, near Liverpool, and it will see the installation of a gas-fired "peaker plant" capable of generating some 7.2 megawatts of power.

Pan African Resources plc (LON:PAF) has revealed a considerable improvement in earnings amid increased low-cost production from tailings, output from remnant mining at the Evander mine, and higher gold prices. The company said that earnings per share for the six months ended 31 December would be in the range of 1.12 to 1.17 US cents, while headline earnings per share would be between 1.11 to 1.16 cents. This represents a significant improvement from the 0.39 cents and 0.50 cents per share respectively for the same period of 2018.

Genel Energy PLC (LON:GENL) told investors it has received its latest payment for oil produced in Kurdistan, northern Iraq. The company, in a statement, said that the partners in the Taq Taq field received US$7.8mln gross, of which Genel’s share amounts to US$4.3mln. The payment relates to oil sales in September. Additionally, a further US$7mln ‘override’ payment was received from the KRG representing some 4.5% gross licence revenue for the Tawke field for the month of September.

Salt Lake Potash Ltd (LON:SO4) (ASX:SO4) said it is anticipating that it will finalise full funding for its Lake Way SOP project in Western Australia “in the coming months”. In a quarterly update for the period ending 31 December, the AIM-listed firm said stage 2 of the on-lake construction of the project was progressing on schedule, with the building of evaporation ponds and trench infrastructure having begun in November, with over 400 hectares of brine evaporation pond area nearing completion and 35 kilometres of brine abstraction trenches planned to complete.

Greencoat UK Wind PLC (LON:UKW) announced that its unaudited net asset value as of 31 December 2019 was 121.4p per share. The company also said it will pay a quarterly interim dividend of 1.735p per share with respect to the quarter ended 31 December 2019 and that it has increased its target dividend for 2020 to 7.1p per share, in line with the Retail Prices Index for December 2019. The firm also advised shareholders that it will release its annual results for the period to 31 December 2019 on Thursday 27 February 2020.

6.40am: Stocks called higher 

UK stocks are set to claw back some of yesterday’s losses after some Chinese data calmed nerves over the coronavirus emergency.

Spread betting quotes indicate the FTSE 100 will open around 37 points higher at 7,419.

Chinese markets may be on an extended break to celebrate the new lunar year but the People’s Republic is still pumping out data.

China's manufacturing purchasing managers’ index (PMI) for January eased to 50.0 from 50.2, in line with expectations. The unofficial version of the non-manufacturing PMI advanced to 54.1 from 53.5 in December.

In both cases, a reading above 50 indicates an expansion in activity. Neither survey covered a period when the coronavirus was in full flow.

Talking of which, the World Health Organisation declared the coronavirus outbreak a global health emergency yesterday.

The number of confirmed cases has risen above 9,800 and the total death toll has reached 213. The US reported its first case of human-to-human transmission while Russia has closed its land border with China to travellers.

“Finally, OPEC+ is considering bringing forward its next meeting to February to discuss further output cuts to curb effect on prices from the drop in demand due to the coronavirus,” observed Danske Bank.

The Hang Seng index this morning was down 87 points (0.3%) at 26,360. In Japan, the Nikkei was up 229 points at 23,207.

US markets were buoyant yesterday after a dull start with the Dow Jones climbing 125 points to close at 28,859 and the S&P 500 rising 10 points to 3,284.

Today in the UK will see the release of the GfK consumer confidence survey for January as well as the Bank of England’s bank lending data for December.

“Broadly as suggested by today's European Commission indicator of UK consumer confidence (up 2.1pt to the best reading since August 2018), the headline GfK index is expected to rise to a sixteen-month high. UK Finance data published earlier this week suggest that the BoE figures will report a sizeable increase in mortgage approvals and stronger consumer credit too,” said Daiwa Capital Markets.

“Of course, at 23.00 GMT on Friday, the UK will leave the EU. Apart from losing its representation in EU decision-making, however, nothing of substance will change. The UK will continue to benefit from all the rights and fulfil all the obligations of EU membership throughout the transition period, set to last at least until the end of the year,” Daiwa explained.

On the corporate front, a trading update from utilities provider SSE PLC (LON:SSE) is unlikely to set the pulses racing.

Despite identifying the company as a potential takeover target, Goldman Sachs recently downgraded the shares ahead of today’s fiscal third-quarter update, observing that the nuts and bolts of the business are not very exciting.

Hargreaves Lansdown PLC (LON:HL.) will be putting out interim numbers that will reveal whether the second quarter has picked up after a weak start to its financial year.

The FTSE 100-listed investment platform group flagged that new business was hit by “weak investor sentiment” in the three months to 30 September.

Nothing to do with the company’s cheerleading of funds run by once-lauded stock-picker, Neil Woodford.

Boris Johnson’s election win should benefit the financial sector, said analysts at Peel Hunt, as rising asset prices help managers and improve confidence in new investment.

In particular, HL should see increased flows from clients, particularly in the run-up to the tax year-end, with little impact from foreign exchange movements as it is largely a domestic player.

Significant announcements expected on Friday:

Brexit Day

Trading announcements: SSE PLC (LON:SSE), Talktalk Telecom Group PLC (LON:TALK)

Interims: Hargreaves Lansdown PLC (LON:HL.)

Finals: Premier Veterinary Group PLC (LON:PVG)

Economic announcements: UK consumer confidence, US personal spending, US Chicago PMI

Around the markets:

  • Sterling: US$1.3097, up 0.04 cents
  • 10-year gilt: 0.561%, up 2.16 basis points
  • Gold: US$1,571.80 an ounce, down US$11.70
  • Brent crude: US$58.23 a barrel, up 90 cents
  • Bitcoin: US$9,348, up US$99

City headlines:

  • Financial Times

  • Uber and DoorDash held merger talks last year with Japan’s Softbank acting as matchmaker.
  • Shriti Vadera, the chairwoman of Santander UK, is to become the next chair of Prudential, the UK’s largest listed insurer.
  • Consultancy firm Deloitte has been hit with a record UK insolvency fine of £1 million for failures related to the collapsed electricals retailer Comet Group.
  • The Guardian

  • Amazon churned out over $87 billion for the final quarter of 2019, compared with $72.4 billion in the fourth quarter of 2018, as the tech company’s massive investment in faster shipping paid off.
  • Royal Dutch Shell made a profit of $2.9 billion in the last three months of 2019, down from $5.7 billion in the final quarter of 2018, and delayed the world’s largest share buyback scheme blaming weaker oil and gas markets.
  • Film and TV production in the UK registered a record spend of £3.6 billion last year, fuelled by the making of Hollywood hits such as the latest James Bond film No Time To Die and Sam Mendes’s 1917.
  • The Times

  • Sports drinks and “enhanced” water helped to send Coca-Cola’s fourth-quarter results higher, pushing its shares up yesterday by as much as 3.5%.
  • Diageo reported a 4.2% rise in net sales to £7.2 billion in the six months to the end of December, but the drinks maker trimmed its sale outlook because of global trade concerns.
  • Daily Mail

  • Avast's shares slumped for a third day after it said it will close the division at the centre of a data privacy scandal.
  • Nearly £1.3 billion was wiped off BT's value after it said restrictions on kit made by China's Huawei would cost it dearly.
  • The Daily Telegraph

  • Facebook’s disappointing financial results wiped almost $40 billion off its market value yesterday, costing its chief executive Mark Zuckerberg US$5.2 billion.
  • TSB is paying out bonuses for the first time since 2017 as the lender finally bounces back from its catastrophic IT meltdown.
  • IBM boss Virginia Rometty is retiring after almost 40 years at the technology giant and will be replaced by cloud division chief, Arvind Krishna.
  • H&M will appoint Helena Helmersson, currently chief operating officer, as its first ever female chief executive.
  • Mike Ashley’s Sports Direct has resolved a €674 million tax row with the Belgian authorities that almost derailed its annual results last summer.
  • Mark Carney’s last meeting as Governor of the Bank of England was overshadowed by fresh concerns as traders reported a sudden move in sterling around 15 seconds ahead of the Monetary Policy Committee’s announcement.

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