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FTSE 100 suffers triple-digit fall as health fears grip markets

Britain's blue-chip index closed down nearly 139 points at 7,017, with the 7,000 level looking vulnerable

Meggitt PLC -
  • FTSE 100 index closes nearly 139 points lower
  • US stocks tumble again
  • Sterling's strength weighs on Uk blue-chips

5.40pm: FTSE 100 closes down 

FTSE 100 index suffered another triple-digit fall on Tuesday as traders reeled from global health fears.

Britain's blue-chip index closed down nearly 139 points at 7,017, with the 7,000 level looking vulnerable.

The more domestically focused midcap FTSE 250 tanked 401 points to close at 20,715.

"Health fears continue to hurt market sentiment as the major equity markets in Europe are all in the red," said analyst David Madden, at London-based CMC Markets, 

"The colossal losses that were racked up yesterday encouraged some bargain hunting at the start of today’s session, but then old concerns crept in, hence why we are offside again. The coronavirus fears have gripped European stocks as dealers are worried that this part of the world could go down the Wuhan route in terms of being on lockdown."

On Wall Street, the Dow Jones dropped over 342 points and the S&P 500 shed 42 points.

Cruise ship operator Carnival (LON: CCL) was Footsie's biggest loser, sinking nearly 6% to 2,639p.

3.40pm: Triple-digit decline on the cards for the Footsie

Losses in London are lengthening and the Footsie is now looking at the possibility of a triple-digit fall on the day.

This morning’s firm start all seems a long time ago, with the FTSE 100 languishing at 7,064, down 93 points (1.3%).

A combination of a resurgent sterling and growing fears about the effect of the coronavirus on the global economy was responsible for the rout in London.

“If 2019 proved to be a tough year for world trade given the effects of the trade war, the spread of the coronavirus threatens to suppress it still further,” said ING’s Timme Spakman.

“We were only expecting growth of 0.5% for the year back in January before the scale of the outbreak was known. According to the latest figures from the Dutch Bureau for Economic Policy Analysis, 2019 world trade levels were, on average, 0.4% lower than in 2018. Clearly, Covid-19 is likely to slash world trade in this first quarter. The overall impact for 2020 will depend on the rebound once the virus is under control,” the international trade analyst said.

“South Korean factories have followed those in China which have closed in an effort to contain the virus. Factory shutdowns have led to a significant decline in shipping movements. According to Alphaliner, 46% of the scheduled shipping lines between Asia and northern Europe have been cancelled,” Spakman continued.

“Cancelled flights may also have a significant impact on world trade, notably on time-sensitive goods. It's worth noting, however, that it's mostly high-value goods which are shipped by air so in volume terms this may not be too significant. In terms of value, however, air freight represents a third of world trade,” the analyst reported.

2.45pm: Tesco announces lay-offs

As expected, the Dow Jones has opened on the front foot with a triple-digit gain.

The 30-share industrial average was up 124 points (0.5%) at 28,084.

In the UK, the FTSE 100 is off 56 points (0.8%) at 7,100.

Supermarket giant Tesco PLC (LON:TSCO) has announced that more than 1,800 employees are set to be made redundant as part of a change in policy with regard to in-store bakeries.

Shares in Tesco were down 1.1% at 246.5p.

Embattled hospitals operator NMC Health PLC (LON:NMC) defied the trend and topped the Footsie leader-board with a 6% gain at 899.4p after The Vanguard Group revealed it had built up a 4.4% stake.

2.20pm: US indices to open higher

The Dow Jones industrial average is expected to move back above 28,000 when US markets begin trading shortly.

Spread betting quotes indicate that the Dow, which crashed by more than a thousand points yesterday, will open at around 28,088, up 127 points.

The broader-based S&P 500, which tumbled 112 points yesterday to close at 3,226, is expected to open its account some 13 points higher at 3,239.

“Wall Street is still on course for a slightly positive open but given how quickly Europe has turned south, I'm not confident it will last. Perhaps investors in the US still feel a little sheltered from the direct effects of the spread at the moment but should it accelerate in Europe and Asia, I don't think they will for long,” admitted Oanda’s Craig Erlam.

The FTSE 100, which also started the day on the front foot, is down 60 points (0.8%) at 7,097, hobbled by the pound’s progress against the US dollar; sterling is trading at around US$1.2974, up by more than four-tenths of a cent.

1.30pm: Back above 7,200

There has mercifully been little significant coronavirus news hitting the market today, leaving economists to differ over the February CBI distributive trades survey.

Howard Archer, the chief economic advisor to the EY ITEM Club, seems to be at odds with Pantheon Macroeconomics’ Samuel Tombs over what the latest survey readings mean for consumer confidence.

“While showing marginal improvement to a 10-month high, the February CBI distributive trades survey does not do much to advance the case that the rise in consumer confidence following December’s decisive election has lifted their willingness to spend,” Archer declared.

Tombs had suggested the survey was “still consistent with a consumer recovery” in the current quarter.

On the other hand (as economists apparently like to say – hence the call for “one-handed economists”), Archer does concede that consumer confidence has clearly picked up since December’s election.

Nevertheless, “retailers are hardly optimistic about sales prospects for March with a balance of -3% expecting sales to be up year-on-year in the month,” Archer said.

The FTSE 100 was down 44 points (0.6%) at 7,113.

12.15pm: Footsie dips below 7,200

Pantheon Macroeconomics said the February CBI Distributive Trades Survey is still consistent with its forecast of a consumer recovery in the current quarter.

“The reported sales balance increased to +1 in February, from zero in January, but undershot the consensus, +3,” reported Pantheon’s chief UK economist, Samuel Tombs.

“The CBI’s survey suggests that households’ spending is growing at a moderate rate in Q1, after it flatlined in Q4. The reported sales balance edged up to its highest level since April and was well above its 12-month average, -14. Admittedly, the more accurate sales-for-the-time-of-year balance dropped to -14 in February, from -7 in January, falling slightly below its 12-month average, -9. Nonetheless, it is consistent with year-over-year growth in retail sales volumes recovering to about 1.5% in February, from 1.2% in January,” Tombs said.

“In addition, some of this weakness might have reflected temporary disruption caused by the extremely wet weather. Average rainfall this month has been three times its long-run February average, an unprecedented deluge. This will have temporarily hit demand for new spring clothing ranges, as well as persuaded people to stay at home, rather than go shopping. March should be a much stronger month for retail sales,” Tombs predicted.

The FTSE 100 was down 59 points at 7,098.

11.45am: CBI Distributive Trades Survey offers a small chink of sunlight

Retail sales volumes were more or less flat in the year to January, according to the latest CBI Distributive Trends Survey.

The bosses' pressure group said that although retail sales remained flat for the fourth consecutive month and orders fell in the year to February, investment plans are showing “a noticeable improvement” in the latest three-month period compared to the previous quarter.

“The prospects for a recovery in investment in the retail sector are on the up. This is particularly the case among large retailers, driven by shifts online and the trend for re-purposing retail space but the first months of 2020 haven’t brought a tangible change in fortunes on the high street. Conditions remain tough, especially for smaller retailers, and that won’t be changing anytime soon,” suggested Ben Jones, the principal economist at the CBI.

“Retailers will be looking to the new Chancellor to recognise the challenges facing the sector in his upcoming Budget,” said Jones, doing what pressure groups do.

“In an increasingly digitalised world, there has never been a more important time for the Government to set out a path for reform to the broken business rates system. It must be made fairer and more sustainable across all sectors and regions,” Jones said.

Sales were seen as poor for the time of year in February, with – on a per 100 basis – the number of retailers of a gloomy disposition exceeding those of a cheerier frame of mind by 14 (giving a balance of -14%) and are expected to remain poor for the time of year next month (-8%).

The growth in internet sales slowed (balance of +40%), which is below the average balance level of +46%.

The number of FTSE 100 constituents clinging on to gains was just 15 and none of them were retailers. The index was down 37 points (0.5%) at 7,120.

10.45am: Red is the new green

Red is the new green for the Footsie, which has seen its early gains turn into losses.

London's index of leading shares was down 48 points (0.7%) at 7,109, with Croda International PLC (LON:CRDA) and Meggitt PLC (LON:MGGT) leading the retreat after both issued results.

Speciality chemicals group Croda was down 4.2% as it reported a 3.4% year-on-year decline in revenue and a 3.7% slide in profit in constant currency terms.

Meggitt's dip was more about the outlook statement, with the group warning that the grounding of Boeing's ill-fated 737 Max will constrain growth this year, as will the fall-out from the coronavirus.

“These good figures reflect strong performance in the respective end markets, civil aerospace, defence and energy, as well as property transactions and a large pension contribution in the prior year; however, the production halt of Boeing’s 737 MAX is the key factor for which the group is a supplier to and the ongoing impact of Covid-19 on the global economy and travel industry are dark clouds on the horizon concerning to management,” said Helai Miah, an investment research analyst at The Share Centre.

“The shares have fallen back a fair bit in recent weeks reflecting the impact that Covid-19 has had on the airline industry, the travel sector and the market in general. Despite these headwinds, the group’s underlying performance has been good but it’s natural to be cautious on the sector,” he added.

9.20am: Recovery getting smaller by the minute

It's not much – a six-point gain – but after yesterday's shake-out, investors will probably accept the Footsie's meagre progress this morning.

The trouble is, the firm start is already fading; the index was knocking on the door of 7,200 at one point but is now down to 7,163, not helped by sterling rallying by almost half a cent against the US dollar, which is making the many dollar-earners among the Footsie's constituents less appealing.

On the other hand, at least gold has lost its allure this morning, shedding US$21.70 at US$1,655 an ounce, which suggests some sort of “risk on” mentality might be forming in the markets.

“Speculation around central banks coming to the rescue with a burst of new stimulus may cushion downside losses and rekindle appetite for riskier assets; however, with the coronavirus infecting over 80,000 people and spreading through populations far from its origin in China, uncertainty still remains a dominant theme with markets on high alert,” said Lukman Otunuga at FXTM.

8.30am: Small recovery

It wasn’t quite the bounce expected ahead of the market open, but the FTSE 100 at least found itself in positive territory after Monday’s bloodbath, which saw almost 250 points wiped from the benchmark.

In early trade, the index of UK blue-chips opened 24 points higher at 7,180.60

Coronavirus cases may be on the decline in China, the seat of the outbreak; however, Japan, South Korea and, closer to home, Italy are a continuing cause for concern.

The oil price has taken a beating over recent days amid fears of a global economic slowdown as have mining stocks, while the airlines were on the receiving end of some savage downgrades on Monday as international travel became a major concern.

Unlike yesterday, there were some blue-chip risers with Prudential (LON:PRU) leading the field with a 2.5% gain after it emerged that an activist investor looking to break up the insurer has it in its cross-hairs.

There was a bounce-back for the miners led by Anglo American (LON:AAL), up 2%, while publisher Pearson (LON:PSON) appears to be pulling further away from the Footsie relegation zone with a 2% advance.

Aero-engineer Meggitt’s results and outlook statement weren’t well-received with the stock down 4.6%, meaning it topped the blue-chip fallers’ list.

Proactive news headlines:

Itaconix PLC (LON:ITX) has added a second European customer to its client base for its Itaconix CHT122 bio-based detergent ingredient. The customer is using the Itaconix polymer as a key ingredient in a new non-phosphate detergent.

Gfinity PLC (LON:GFIN) has been appointed to operate online qualifying and playoffs for the US edition of the ePremier League esports tournament. The ePremier League USA, which is run by the Premier League and US broadcast network NBC Sports, is a free-to-play tournament that will see players compete as their favourite Premier League football team through the FIFA video game franchise.

Oracle Power PLC (LON:ORCP) has highlighted recent talks between the Pakistan authorities and the chair of the China-Pakistan Economic Corridor (CPEC) organisation which, among other things, covered proposals to build a rail line through the Thar desert. A development involving a 105 kilometre rail line from Chhor to Islamkot – passing through the Thar desert – would allow the transportation of coal and open up distribution to new customers.

Arecor Ltd, the privately-owned biopharmaceutical company advancing therapies to enable healthier lives, said it has achieved an important second, contractual milestone with one of its pharmaceutical partners. The first milestone was triggered in October 2017 following the signature of a license agreement between the parties.

Clinigen Group PLC (LON:CLIN) chief executive, Shaun Chilton, has set the scene for a strong end to the financial year, telling shareholders that the firm's organic gross profit growth would be at the upper end of the medium-term range of 5%-10%. The update was provided alongside a robust set of interims from the pharma and services company, which revealed a 35% increase in gross profit £108.1mln, representing underlying growth of 9%.

InnovaDerma PLC (LON:IDP) said the online customer base for its Skinny Tan product has increased by 12% to 683,000 since June of last year. In its results statement covering the second half of 2019, the developer of beauty, personal care and life science products said it had been a period of strong progress. Revenue surged 32.8% to £5.1mln from £3.9mln in the same period of 2018.

Tlou Energy Limited (LON:TLOU) told investors that it has received a regulatory document in support of the tender for its coal bed methane venture in Botswana. The written confirmation is from Botswana’s Ministry of Mineral Resources, Green Technology and Energy Security. Tlou said it looks forward to working to finalise the power purchase agreement for the project in due course.

FastForward Innovations Ltd’s (LON:FFWD) portfolio firm EMMAC has launched Medican, the UK’s first operational distance medical cannabis pharmacy. EMMAC, in which FFWD owns a 2.4% stake, said Medican has already processed over 100 medical cannabis prescriptions in the UK and will be able to leverage EMMAC’s vertically integrated supply chain to create value for clients.

OptiBiotix Health PLC (LON:OPTI) has updated on a number of developments to support the commercial roll-out of its products. Chief among them was the complete evaluation of the ingredients of weight management line SlimBiome to ensure they are generally recognised as safe per US Code 21 CFR 170.30.

Red Rock Resources PLC (LON:RRR) will undertake a second phase of exploration on the Luanshimba licence in the copper belt in the Democratic Republic of Congo, near the Zambian border. The licence is prospective for copper and cobalt mineralisation. An initial programme conducted in 2018 identified two open-ended areas strongly anomalous for copper and cobalt.

Cora Gold Ltd (LON:CORA) has returned further gold intersections from drilling at its Sanankoro project in the Yanfolila gold belt, Southern Mali. The primary focus of the drilling was to target shallow oxide extensions beyond the footprint of the existing 5mln tonne JORC resource, which already shows 265,000 ounces of gold.

Aminex PLC (LON:AEX) and partner APT are teeing up their operations in Tanzania in anticipation of the ‘greenlight’ from regulatory authorities. The company, in a statement, also highlighted that there are “positive indications” that Tanzania is re-engaging with the international business community, after a period of reduced corporate engagement, in order to support the country's power demands.

Solo Oil PLC (LON:SOLO) chief executive Tom Reynolds said the AIM-quoted investment firm is “encouraged” by Tuesday’s update from Tanzania partner Aminex PLC (LON:AEX).

Anglo Pacific Group PLC (LON:APF)(TSE:APY) has updated the market on the likely impact of the coronavirus on its business, ahead of a presentation to the BMO Capital Markets mining conference in Miami today. While conceding that it’s too early to say what the overall impact will be on commodities prices, Anglo Pacific noted that generally prices have held up well and that coking coal prices are actually up 14% in the year-to-date.

ANGLE PLC (LON:AGL) (OTCMKTS:ANPCY), a world leading liquid biopsy company, and BioView Ltd. (TASE:BIOV) will present results of their recent collaboration to develop an integrated workflow for identifying clinical biomarkers on circulating tumor cells (CTCs) at the Molecular Med Tri-Con 2020 Conference in San Francisco (Tri-Con) on March 4. The presentation, "Combining Cell Harvesting and Imaging Technologies for CTC Liquid Biopsy Sample-to-Answer", will be presented by Anne-Sophie Pailhes-Jimenez, ANGLE Senior R&D Group Leader at Molecular Med Tri-Con 2020.

Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) (OTCMKTS:WHELF) has completed the second stage of on-lake construction at its sulphate of potash (SOP) from its Lake Way Project in Western Australia. Stage 2 includes 275 hectares of brine evaporation ponds which will provide feed salts to the process plant in 2021.

ADM Energy Plc (LON:ADME), the AIM-listed oil and gas investing company quoted on AIM, announced that its joint ‘house’ broker Fox-Davies Capital as issued an initiation report on the company.

SDX Energy PLC (LON:SDX), the MENA-focused oil and gas company is pleased to announce that Peel Hunt has been appointed as joint corporate broker to the company with immediate effect.

6.30am: Bounce back predicted

Over Christmas and into the early new year there was much speculation as to whether the FTSE 100 would push above 8,000 in 2020, dragged by Wall Street, which continued to set records.

Based on its most recent performance – a drop of almost 250 points on Monday – it will be lucky to hold above 7,000 if the coronavirus outbreak turns into a global pandemic.

Indeed, in the first six weeks of the current year, the index of UK blue-chips has lost around 6% of its value as the flu-like illness started as a small cluster in China’s Wuhan province, but quickly overtook the SARs epidemic in terms of infections and fatalities.

Tuesday is expected to see a bounce-back of sorts for the Footsie, though analysts said sentiment will be undermined further if the spread outside China of the coronavirus continues at the present rate.

The portents aren’t good. In Japan overnight almost 800 points were wiped from the Nikkei 225 as the country returned from an extended weekend break, with the authorities admitting they were struggling to contain the virus.

Inside China, the number of new cases is starting to fall. But in affected countries such as South Korea and Italy, it is a case of how quickly can the clusters be cauterised?

 “There is no question financial markets are coming round to the realisation that this particular crisis is likely to have a slightly longer shelf life than many thought was the case a couple of weeks ago; however, flu outbreaks are hardly anything new,” said Michael Hewson, senior market analyst at CMC Markets (UK).

“They happen every year and according to the World Health Organisation flu kills up to 650,000 a year, yet markets are reacting to an outbreak that has so far only affected a fraction of that number.”

In the sell-off on Monday, airlines were clobbered, the oil price tumbled while gold and bonds were in demand as haven assets.

Indicative of the flight to safety was the drop in the US 30-year yield, which hit a record low.

Tuesday’s scheduled news is the amuse-bouche before the main courses during a packed back-end of the week. It is kicked off by aerospace group Meggitt (LON:MGGT), ingredients and chemicals firm Croda (LON:CRDA) and property developer Derwent (LON:DLN).

Around the markets:

  • Pound US$1.2932, unchanged
  • Gold US$1,646.80 an ounce, down US$29.80
  • Brent crude US$56.62 a barrel, up 32 cents

City Headlines: 

Financial Times

  • Japan warns of rapid coronavirus spread after global market sell-off
  • KPMG investigates Carillion auditor over other outsourcer
  • World Bank’s pandemic bonds sink as coronavirus spreads
  • UK lays down red line for Brexit trade talks

Times

  • American hedge fund takes aim at Prudential
  • Record £30.9mln paid to turn off wind farms
  • Blackstone set to invest billions in Britain
  • Glaxosmithkline works with China to find vaccine

Telegraph

  • Undersea cable fault meant Britain missed out on record wind power
  • Sunak tells the taxman not to be 'heavy-handed' in shake-up for the self-employed

Guardian

  • Frederick Barclay was secretly recorded at Ritz, High Court hears
  • UK lags behind in €124bn European low-carbon investment table
  • Tuesday’s major announcements

Significant events expected on Tuesday:

Finals: Croda International PLC (LON:CRDA), Meggitt PLC (LON:MGGT), Derwent London PLC (LON:DLN), Hammerson PLC (LON:HMSO), Petrofac Ltd (LON:PFC), Synetics PLC (LON:SNX)

Interims: Hotel Chocolat Group PLC (LON:HOTC), InnovaDerma PLC (LON:IDP), Clinigen Group PLC (LON:CLIN), Morgan Advanced Materials plc (LON:MGAM), Dotdigital Group PLC (LON:DOTD), Springfield Properties PLC (LON:SPR), Bluefield Solar Income Fund Limited (LON:BSIF)

Economic data: CBI UK distributive trades survey, US consumer confidence, US house prices

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