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(Alliance News) - Stock prices in London were sharply lower at midday on Thursday, as the UK economy faced contending with more stringent measures to stop the spread of the coronavirus.
London will face Tier 2 coronavirus restrictions from Saturday with households banned from mixing indoors, barring millions of the capital's residents from meeting other households in their homes or other indoor spaces.
Further, discussions are continuing between local leaders and the UK government over the extension of coronavirus controls, with Greater Manchester and Lancashire at risk of having the toughest Tier 3 restrictions imposed, which would involve closing pubs and bars unless they can operate as restaurants.
The large-cap FTSE 100 index was down 111.71 points, or 1.9%, at 5,823.35. The mid-cap FTSE 250 index was down 207.78 points, or 1.2%, at 17,742.63. The AIM All-Share index was down 0.6% at 975.68.
The Cboe UK 100 index was down 1.5% at 581.59. The Cboe 250 was down 0.9% at 15,040.56, and the Cboe Small Companies down 0.1% at 9,432.45.
In mainland Europe, the CAC 40 index in Paris was down 1.2%, while the DAX 30 in Frankfurt was down 2.2%.
On the continent, France on Wednesday became the latest European country to toughen anti-coronavirus measures, imposing a strict curfew in Paris and eight other cities from Saturday.
In addition, new cases of coronavirus infections in Germany have soared to 6,638 in the past 24 hours, official data showed, reaching a daily level not seen since the start of the pandemic. The alarming jump in numbers came just hours after Chancellor Angela Merkel met with the leaders of Germany's 16 federal states to agree tougher restrictions designed to slow the spread of the contagion.
"Renewed health concerns and tighter restrictions around Europe are hammering stocks this morning. In recent weeks, the chatter surrounding a possible stimulus package in the US grabbed traders' attention, but all the while the health situation was deteriorating," said CMC Markets analyst David Madden.
"We now find ourselves in a scenario whereby the pandemic is back in centre stage, while the prospects of a US relief package this side of the presidential election seem very low. Dealers are dumping stocks for fear that economic activity will drop off because of the tighter restrictions in various parts of Europe," Madden added.
In the FTSE 100, Just Eat Takeaway.com was the only stock in the green, up 0.1%. The online takeaway platform was extending gains from Wednesday after reporting a substantial acceleration in order growth. The stock ended up 6.4% on Wednesday.
At the other end of the large caps were hospitality firms. Premier Inn-owner Whitbread was the worst performer, down 6.0%, while InterContinental Hotels was down 3.3%.
Members of Parliament in the capital have been told that London will move to Tier 2 at midnight on Friday, meaning households will be banned from mixing indoors including pubs from Saturday. Ministers are holding a series of talks with MPs from the regions affected by the changes ahead of Health Secretary Matt Hancock giving a Commons update on the measures.
"Fears over tighter lockdown conditions once again put a big dent in the travel and leisure sector, with Whitbread, International Consolidated Airlines and InterContinental Hotels among the big FTSE fallers," said AJ Bell's Russ Mould.
IAG was down 5.7%. The British Airways parent additionally was suffering a negative read-across after Irish carrier Ryanair Holdings said it will slash more flights this winter due to coronavirus restrictions. Ryanair was down 3.4%.
In the FTSE 250, budget airline easyJet was down 6.1%, while Jet2 - formerly known as Dart Group - was down 3.2%.
Ryanair said forward bookings have "materially" weakened in November and December due to increased flight restrictions imposed by EU governments. The company announced "significant" base aircraft cuts in Belgium, German, Spain, Portugal and Vienna. These are in addition to winter closures of bases in Cork and Shannon in Ireland and in Toulouse in France.
In light of the weaker bookings, the Irish carrier further reduced its winter schedule, from November to March - taking capacity down to 40% from 60% of prior year. Ryanair said with the greatly reduced winter capacity and load factors of around 70%, it now expects full-year traffic to fall to 38 million passengers.
The budget airline said this guidance could be further revised downwards if EU governments continue to "mismanage air travel and impose more lockdowns this winter".
In the FTSE 250, AO World was the standout performer, up 18%. The online electrical goods retailer said it expects interim revenue to surge more than 50%.
AO said it expects revenue for the six months ended September 30 to surge 57% to around GBP715 million. It said UK revenue climbed 54% and Germany revenue jumped 83% at constant currency.
At the other end of the midcaps, Domino's Pizza was the worst performer, down 12%. The pizza delivery chain said it is set to deliver good full-year profit despite the uncertain backdrop.
UK & ROI sales were up 19% year-on-year in the third quarter ended September 30 to GBP342.1 million from GBP288.2 million. UK system sales were up 20%, with the UK accounting for 95% of total UK & ROI system sales.
Domino's said the UK government's reduction in value added tax to 5% from 20%, implemented in July, helped franchisees mitigate costs and enabled them to pass savings on to its customers. It however had limited direct benefit to the company's profitability.
The company expects to report a full year underlying group profit in the range of GBP93 million and GBP98 million, in line with market expectations. It reported underlying pretax profit of GBP98.8 million in financial 2019.
"Negative operational gearing is a very large factor as to why earnings momentum at Domino's has turned negative, in our view and the structural challenges are clear. Domino's is not able to do national campaigns hence the dispute with the franchisees is having a major impact on trading," commented Liberum.
The pound was quoted at USD1.2951 at midday on Thursday, sharply lower from USD1.3029 at the London equities close on Wednesday, amid no-deal Brexit fears on the day of the UK government's self-imposed deadline.
Ahead of the latest EU summit in Brussels, UK Prime Minister Boris Johnson voiced his "disappointment" that the two sides had not been able to move forward more quickly.
European Commission President Ursula von der Leyen and European Council President Charles Michel again reiterated that while the EU still wanted a deal, it could not be at "any price".
Analysts at ActivTrades commented: "Today brings the UK's self-imposed deadline for a post-Brexit agreement to be reached with the EU but despite no such deal being in place and a prevailing risk-off sentiment in the markets, investors don't seem to believe the UK will walk away from negotiations empty handed.
"This could be because, faced with a battered economy, climbing Covid-infection numbers and an increasingly tense domestic political environment, the last thing Boris Johnson's government needs is another fire to extinguish."
The euro was priced at USD1.1705, down from USD1.1760. Against the yen, the dollar was quoted at JPY105.28, up from JPY105.07.
In commodities, Brent oil was trading at USD42.33 Thursday midday, down sharply from USD43.18 at the close Wednesday. Gold was quoted at USD1,895.73 an ounce, down from USD1,909.80.
US stock market futures were pointed to a sharply lower open with a deal over a much-needed federal stimulus agreement becoming even more elusive before November's presidential election.
The Dow Jones Industrial Average was called down 1.0%, the S&P 500 down 1.1% and the Nasdaq Composite down 1.6%.
US Treasury Secretary Steven Mnuchin on Wednesday warned that, while talks continued, Republicans and Democrats were still "far apart" on a rescue package.
The general consensus is that a new spending package will get passed eventually, but the comments reinforced expectations that there will be no agreement before next month's presidential election.
Ahead in the US earnings calendar, Morgan Stanley rounds off bank earnings season on Thursday, when the investment bank reports third-quarter results before the opening bell in New York.
The economic events calendar on Thursday has US jobless claims and import & export price indexes are due at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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