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FTSE 100 closes lower as coronavirus fears and corporate updates hit equities

Britain's blue-chip index closed down nearly 43 points at 7,409. The FTSE 250, conversely, went higher, gaining over 116 points at 21,790

AstraZeneca -
FTSE 100 closed lower but FTSE 250 gained on Friday
  • FTSE 100 index closes nearly 43 points down
  • FTSE 250 up 116 points
  • GVC Holdings dips after Peel Hunt cuts target price

5.10pm: FTSE 100 closes in red

FTSE 100 index closed on Friday in the red, as it did yesterday, as coronovirus fears are still hitting equity markets.

Britain's blue-chip index closed down nearly 43 points at 7,409.

The FTSE 250, conversely, went higher, gaining over 116 points at 21,790.

"The FTSE 100 is lower this afternoon as health care, energy and banking stocks are in the red," said David Madden, market analyst at CMC Markets.

"Corporate updates triggered the declines in the pharma sector as well as the banking industry. Dealers are still worried about the health emergency in China as the situation isn’t showing any signs of improving."

Over on Wall Street, the picture is also mixed. The  Dow Jones Industrial Average lost over 28 points at 29,395. The broader-based S&P 500 is ahead by nearly five points, while the Nasdaq added around 19 points. Against the US dollar, the pound is down 0.05% to US$1.3035.

On the company front, the top loser on Footsie was Royal Bank of Scotland (LON:RBS), which plunged 6.8% to  stand at 213.10p on outlook news.

The bank is to cut back the NatWest Markets division – its investment banking arm, so lending is likely to become a more important part of the business, noted  analyst Madden.

"In light of the depressed interest rate environment, the income from lending is likely to remain under pressure. In a historic move, RBS Group will change its name to NatWest Group later this year, presumably the decision was motivated by the desire to cast off the image of the firm’s historic bailout in 2008 – the largest bailout in Europe," he added.

3.00pm: Novacyt continues to be in demand as COVID-19 fears linger

US blue-chips have opened higher, albeit not as impressively as expected after some underwhelming industrial production numbers.

The 30-share Dow Jones Average was down 17 points (0.1%) at 29,407 but the broader-based S&P 500 was up 3 points (0.1%) at 3,376.

US industrial production in January was down 0.3%, which was a slightly heavier fall than 0.2% decline economists had been expecting. Manufacturing output’s 0.1% fall was in line with the consensus forecast.

“Total production was depressed by a second straight plunge in utility output, thanks to the very mild winter weather. Output in the sector fell by 3.9% m/m, after December’s 6.2% drop,” reported Pantheon Macroeconomics’ Ian Shepherdson.

“Utility output is now well below trend and a huge rebound will come when temperatures revert to seasonal norms, but note for now that the Jan decline likely constrained real consumers' spending last month. People don’t realize in real-time that they have saved money when winter temperatures are warmer than usual, so the drop in real spending on utility energy will not immediately be offset by gains elsewhere,” he added.

US retail sales rose 0.3% in January, in line with the consensus.

On the home front, the FTSE 100 has topped loitering around last night’s closing level like a thief casing a joint he plans to rob and has ebbed to 7,428, down 24 points (0.3%).

The COVID-19 virus remains on the market’s mind but it’s an ill wind that blows nobody any good and Novacyt SA (LON:NCYT), which has developed a “research use only” diagnostic test for the virus continues to be in demand, with the shares up 26% today to 98p; a month ago you could’ve bought them for less than one-sixth of that amount.

2.20pm: US indices to edge higher

The Footsie has fallen into the red but not to an extent that would have fund managers venturing out on to the window life to contemplate life's ups and downs.

The index of leading shares is down 4 points (0.1%) at 7,448, despite sterling drifting a fifth of a cent lower against the US.

Talking of the US, the Dow Jones is tipped to open around 21 points higher at 29,444 while the broader-based S&P 500 is seen opening its account at 3,379, up 5 points on last night's close.

1.30pm: Blue-chips mixed

If you imagine the FTSE 100 as a see-saw it is one that could definitely do with a drop of oil today.

The index is practically unchanged and since 9.30am has been trading between 7,450 and 7,470.

The mid-cap FTSE 250 is making a better fist of things, up 74 points (0.3%) at 21,748, despite bookmaker GVC Holdings PLC (LON:GVC) sliding 32.6p to 833.8p after Peel Hunt PLC trimmed its price target by 20p to 1,030p.

The same broker nudged up its price target for GVC’s sector peer 888 Holdings PLC (LON:888) to 215p from 200p while also bumping up William Hill PLC’s (LON:WHM) price target to 260p from 250p.

888 is up a halfpenny to 135.4p but William Hill is down 2.35p at 178.65p.

12.40pm: Equities in a holding pattern

The FTSE 100 is clinging on to meagre gains despite banks being in the doghouse.

London’s index of blue-chip shares was up 4 points (0.1%) at 7,456, no thanks to taxpayer-owned lender Royal Bank of Scotland Group PLC (LON:RBS), which is down 8.4% at 209.5p after it pushed back the target date for hitting its long-term profit goals.

The bank has also decided the RBS brand is so toxic – this side of the Scottish border, at least – it will change its name to Natwest Group.

“The results today have been clouded by the structural overhaul of the now Natwest Group. This moves the focus away from the core philosophy of driving shareholder returns to promote a more sustainable core business and alongside the cautious outlook surrounding future growth, explains the trepidation in the share price this morning,” said Joe Healey, an investment research analyst at The Share Centre.

“It appears not only RBS but others are entering a period of change in the industry pushed by an evolving market environment and stakeholder interests. The group has a history of restructuring; however, time will tell whether this is the right move for the historic bank,” Healey said.

Sector peer, Lloyds Banking Group PLC (LON:LLOY) was down 1.4% in sympathy while Barclays PLC (LON:BARC), whose chief executive officer Jes Staley is being investigated for his past connection with convicted sex offender Jeffrey Epstein, was off 1.1%.

Shares in Middle East hospitals operator NMC Health PLC (LON:NMC) have been on their sick-bed ever since the hedge fund Muddy Waters launched a devastating attack on its accounting policies.

The shares fell a further 4.1% today after it made a statement about the cloudy status of the shareholdings of some its major stakeholders.

The company has received a notification from the advisers to Khalifa Bin Butti and Saeed Bin Butti ostensibly explaining who owns what, while founder B R Shetty has also informed the company of some recent share dealings.

Judging by NMC’s stock market announcement, it is not convinced the notifications have made things clearer.

Meanwhile, Khalifa Butti Omeir Bin Yousef has resigned as a director of the company.

10.55am: Footsie turns positive

The FTSE 100 index had pushed into positive territory by late morning, rallying on expectations for a recovery by US stocks today following overnight falls on Coronavirus fears.

Around 10.55am, the UK blue-chip index was 6 points higher at 7,458.

Joshua Mahony, senior market analyst at IG – which is currently looking for the Dow Jones Industrial Average to open 47 points higher – said: “A bullish Asian session hints at the potential for European and US markets to look beyond the coronavirus fears that remain at the back of the collective market mindset.”

But, he added: “That underlying coronavirus risk is showing its face in the havens, with gold, in particular, gaining ground throughout the week despite stock market gains.”

Mahoney also noted that European markets had been underperforming due to the release of German growth figures which exhibited a lost quarter of 0% growth in the final three-months of 2019.

He said: “The German economy has gone from being the bastion of eurozone growth to perhaps the greatest hindrance, with the industrial powerhouse continuing to suffer under the wrath of Donald Trump’s combative approach to global trade.

“Recent factory orders and industrial production figures out of Germany had highlighted a tough end to 2019, and those expectations go some way to explain the lack of sharp euro declines this morning. The weakness in Germany can be felt in the wider eurozone growth figures, with the Q4 reading of 0.9% representing the lowest growth since Q1 2015.

“The worrying part for eurozone growth is that the weakness seen throughout both Germany and wider region came prior to the coronavirus crisis, with any knock-on impact likely to push Germany into negative growth.”

9.45am: The Footsie spins its wheels

It’s a bit of no-score draw for London’s blue-chips this morning with a slight softening of sterling offsetting negative reaction to corporate news flow.

The FTSE 100 was down just under a point at 7,451.

Sterling was down a tenth of a cent against the US dollar, providing some incentive to invest in the big dollar earners among Footsie constituents but that has been scant consolation for AstraZeneca PLC (LON:AZN) shareholders, where the share price is down 2.1% after the drugs giant’s trading update.

“Last year was a good one for AstraZeneca, having twice raised sales guidance. This positive earnings momentum has led to a fairly decent set of full year results which highlight its progress including regulatory approval for several new medicines.

“Unfortunately the coronavirus threatens to disrupt earnings in China, one of its key markets. It is being cautious and assuming there will be an impact to earnings, which is the right thing to do,” said Russ Mould, the investment director.

On the macroeconomic front, the German economy stagnated in the fourth quarter of last year, showing no change from the previous quarter.

On the year, the economy grew by 0.4%.

“Some weeks ago, we had started to investigate which form the recovery could take from the alphabet soup of options. Will it be a ‘V’ for a strong rebound, a ‘U’ for a longer bottom followed by a strong rebound, a ‘J’ for a longer period of stagnation followed by a weak rebound, an ‘L’ for a long period of stagnation or even a ‘W’ for a double dip recession? Today’s data shows that the alphabet soup has been taken off the menu for the time being. Stagnation, with a risk of a technical recession, currently looks like the only dish served,” said Carsten Brzeski, the chief economist at ING Germany.

8.35am: Dull end to the week

The FTSE 100 took its cue from Wall Street in early trade on Friday as it opened in the red amid continuing worries over the coronavirus outbreak.

The index of UK blue-chips opened down 30 points at 7,421.34

An early corporate victim of the flu-like illness, which has claimed more than 1,300 lives, was revealed as AstraZeneca (LON:AZN), which counts China as one of its main markets.

The drugmaker's shares fell 3.5% in early deals as its fourth-quarter earnings undershot expectations and it warned of the impact of the epidemic.

Royal Bank of Scotland (LON:RBS) wasn’t far behind as the tenure of new boss, Alison Rose, started with a whimper rather than a bang. It’s latest trading statement prompted a 3.5% fall in the stock.

“Every rose has its thorn; scratch beneath every RBS quarterly update and you’ll find a sting or two,” said Neil Wilson of Markets.com.

Staging what can best be described as a ‘dead cat bounce’, was Centrica (LON:CNA), up 1.5%, which led the risers after having the bejesus knocked out of it on Thursday after a rather depressing update on trading.

Proactive news headlines:

Verona Pharma PLC (LON:VRP) (NASDAQ:VRNA) said the results from a successful phase IIb clinical trial of its drug for chronic obstructive pulmonary disease (COPD) have been published in a peer-reviewed scientific journal. Respiratory Research carried the data from Verona’s four-week, 400-patient study first released in 2018. The results showed the company’s drug, ensifentrine, produced a clinically and statistically significant improvements in lung function at all doses.

SDX Energy PLC (LON:SDX) has kicked off the drilling of the Salah (SD-6X) well at the South Disouq project in Egypt. The well will be drilled down to a depth of 9,000 feet and it is expected to complete in late March or early April.

Europa Metals Ltd (LON:EUZ) said the independent geotechnical study of its Toral project in Spain has been completed. The study confirmed the cut and fill method, rather than sub-level stoping, as the best method for the mining model.

Peter Mason has retired as the chairman of the life assurance and pensions management firm Chesnara PLC (LON:CSN). He has been replaced by Luke Savage, a highly experienced company director who was the chief financial officer of Standard Life Aberdeen PLC from 2014 to 2017; before that he was the director of finance and operations at Lloyd’s of London.

Metal Tiger PLC (LON:MTR) is ploughing a further US$1.5mln into Kalahari Metals, giving it just over 62% of the Botswana-focused copper explorer. The natural resources investor will also receive a 2% net smelter royalty over Kalahari’s seven wholly-owned licences.

Ariana Resources PLC (LON:AAU) has received results of due diligence drilling at the Salinbas gold project in Turkey carried out by its proposed partner at the site, Proccea Construction. The AIM-listed explorer said assay results from 600 metres of due diligence drilling had shown “good correlations” with its own drilling results at the site.

Bahamas Petroleum Company PLC (LON:BPC) has confirmed it has now closed the initial subscriptions into its new Bahamian mutual fund, receiving around US$914,000 (c£700,000). The fund was set up exclusively to enable investors in the Bahamas to invest in the company’s exploration campaign in the islands. Subscriptions into the fund were priced at the equivalent of 2p per underlying BPC share which was the market price at the time, early January.

Ergomed PLC (LON:ERGO), a company focused on providing specialised services to the pharmaceutical industry, said that four of its directors have acquired ordinary shares in the company, all at 4.56p per share. It noted that three non-executive directors – Rolf Soderstrom, Dr Jim Esinhart, and Ian Johnson – all purchased 10,000 ordinary shares, while its chief operating officer, Lewis Cameron acquired 10,910 shares.

6.35am: Indecisive start predicted 

London equities are set to make an indecisive start, with sterling stabilising after yesterday’s sharp rise following the resignation of Sajid Javid as chancellor of the exchequer.

Spread betting quotes indicate that the FTSE 100 will open 3 points higher at 7,455.

“Are markets falling out of love with stocks?” wonders Edward Moya at Oanda on Valentine's Day. “Fridays in 2020 have not been the best for stocks and we could see investors fall out of love of their bullish bets as everyone waits to have a clearer picture with the spreading of the coronavirus."

“On the second day of the new methodology of confirming new cases, which includes imaging scans, Hubei reported 4,283 new cases, down from yesterday’s shocking jump of 14,840 cases which included prior days and weeks of cases. China reported the total number of cases has reached 63,851 and that the death toll rose by 121 to 1,380,” Moya noted.

US stocks closed lower yesterday after the Federal Reserve said it would scale back the support it is providing to overnight lending markets.

As from today, the cap on the US central bank’s repurchase agreements will be cut to US$100bn from US$120bn.

The Dow Jones industrials Average clattered 128 points lower to close at 29,423 and the S&P 500 fell 5.5 points to finish at 3,374.

In Asian markets this morning, Japan’s Nikkei was down 166 points at 23,662, but Hong Kong’s Hang Seng index was 115 points to the good.

A Rose for Valentine's Day

On the corporate scene in the UK, the focus will be on updates from two big guns: AstraZeneca PLC (LON:AZN) and Royal Bank of Scotland Group PLC (LON:RBS).

AstraZeneca should meet the upper end of its guidance, said analysts at Deutsche Bank, reckoning management are likely to guide to high single to low double-digit product sales growth at constant exchange rates for 2020, with core earnings per share (EPS) of US$4.00-4.20, implying 10-20% growth.

The dividend is expected to remain unchanged from 2018 at US$2.80 for both 2019 and 2020.

Royal Bank of Scotland’s results will be the first to be delivered by the lender's new chief executive Alison Rose and fortunately for headline writers, they have fallen on Valentine’s Day.

Rose will let the market know whether the disappointing third-quarter before she took over was a glitch or a trend, following a strong performance in the first half of the year.

The third quarter saw the 62.4% taxpayer-owned bank set aside an additional charge of £900mln, while both net interest income and net interest margin (NIM) both contracted, while the bank's cost:income ratio spiked to 93%.

Analysts have recently warned that forecast that RBS’s returns will “fade” due to pressure on NIM and other factors, that its long-awaited dividends will be slow to arrive and there is potential for major Brexit downside.

Rose could announce capital returns of “circa 30% of market cap” for 2020-2022, albeit the Barclays analysts said they expected the timing to be “back-end-loaded” as well as being contingent on external factors such as the propensity for the UK government’s investments arm UKGI to sell down its stake.

On the macro side, US retail sales figures for January will be important, Danske Bank said, “as US private consumption growth has slowed recently (the Fed now says ‘moderate’ consumption growth in its statement, from ‘strong’ growth previously) and the question is whether this is just due to noisy data or more persistent factors”.

“The US manufacturing production data for January also due is not that interesting, as it will not yet capture the impact of the coronavirus,” the Danish bank added.

Significant announcements expected on Friday:

Finals: AstraZeneca PLC (LON:AZN), Royal Bank of Scotland Group PLC (LON:RBS)

Interims: SEGRO PLC (LON:SGRO)

Economic data: China industrial production, China retail sales, EU GDP, US retail sales, US industrial production, US consumer sentiment

Around the markets:

  • Sterling: US$1.3047, up 0.05 cents
  • 10-year gilt: yielding 0.674%, up 3.98 basis points
  • Gold: US$1,578.20 an ounce, down 60 cents
  • Brent crude: US$56.40 a barrel, up 6 cents
  • Bitcoin: US$10,159, down US$23

City headlines:

  • Financial Times

  • Sajid Javid lost a brutal power struggle with Boris Johnson and resigned as chancellor of the exchequer
  • Electric vehicles maker Tesla is to take advantage of its stratospheric share pruce by tapping the market for up to US$2.3bn.
  • UK regulators are investigating the links between Barclays chief executive Jes Staley and disgraced financier Jeffrey Epstein after receiving a batch of JP Morgan emails.
  • The Times

  • JCB, one of Britain’s largest manufacturers, is curbing production at its factories in a bid to see off significant supply shortages triggered by the coronavirus outbreak.
  • Coca-Cola Hellenic Bottling Company boosted profits by 12% last year helped by expansion in key markets including Russia and Nigeria.
  • Dutch food delivery giant Takeaway.com has swung into the black as it prepares to take full control of Britain’s Just Eat.
  • Loss-making budget airline Norwegian Air has said it is “unrealistic” to expect the delivery of the Boeing 737 Max aircraft it has ordered this year.
  • Sir Anthony Habgood, the chairman of Relx, is stepping down after helping to quadruple the value of the business information and analytics group in the past decade.
  • As many as five water companies are taking Ofwat to the competition watchdog over demands to reduce household bills.
  • The Daily Telegraph

  • Centrica registered a £1.1 billion annual loss that sunk its share price, blaming a "challenging environment", singling out the energy price cap and falling natural gas prices.
  • The eurozone economy is showing few signs of the much hoped-for recovery as the industrial slump continues to crush growth and Germany remains “particularly exposed” to a coronavirus crunch in China.
  • The Pentagon has been forced to suspend work on a multi-billion dollar military contract awarded to Microsoft after a legal challenge from Amazon.
  • The US government has broadened its legal case against Huawei, combining individual charges of fraud, intellectual property theft and obstruction of justice.
  • The Guardian

  • The pound hit a new two-month high against the euro as news of Sajid Javid’s resignation and Rishi Sunak’s promotion was announced.
  • Shares in gambling companies have plunged in value by hundreds of millions of pounds after the industry regulator said it would consider slashing the maximum allowable stake on online casino games to £2.
  • Nissan slumped to its first quarterly loss since 2010 as weak sales added to the woes faced by the automotive manufacturer including Carlos Ghosn civil actions.
  • Marks & Spencer is closing two of its clothing distribution centres in a move that puts almost 700 jobs at risk.
  • Airbus has slumped to a €1.4 billion annual loss after receiving record fines for bribery, but raised its dividend as aircraft deliveries hit an all-time high.
  • Daily Mail

  • Tidjane Thiam, the Credit Suisse boss ousted after a spying scandal, revealed profits soared 69% to £2.7 billion last year – the most it had generated since 2010.

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