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(Alliance News) -Â London stocks dived at the open on Wednesday, with investors shaken by the extent of the coronavirus outbreak in the US.
UK banks were among the worst blue-chip performers as they confirmed the suspension of all dividends and buybacks in 2020 due to Covid-19.
The FTSE 100 index was down 240.70 points, or 4.2%, at 5,431.26 early Wednesday. The mid-cap FTSE 250 index was down 517.48 points, or 3.4%, at 14,583.65. The AIM All-Share index was down 1.9% at 669.44.
The Cboe UK 100 index was down 4.1% at 9,209.98. The Cboe 250 was down 2.5% at 12,662.23, and the Cboe Small Companies down 0.4% at 8,039.43.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 3.2% early Wednesday.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 4.5%. In China, the Shanghai Composite is down 0.5%, while the Hang Seng index in Hong Kong is down 2.4%.
"Stock markets are reacting negatively to what now seems to be a likely increase in the duration and breadth of coronavirus lockdowns in the US and elsewhere, which is pointing to a potentially deeper and longer-term hit to economic activity than was anticipated even a week ago," said Stephen Innes, chief market strategist at AxiCorp.
US President Donald Trump has warned Americans to brace for a "hell of a bad two weeks" amid White House projections of between 100,000 to 240,000 coronavirus deaths in the US even if social distancing guidelines are maintained.
Public health officials stressed the shocking number could be less if people across the country were diligent in keeping their distance from one another.
The jaw-dropping projections were laid out during a grim, two-hour White House briefing. Officials described a death toll that in a best-case scenario would likely be greater than the more than 53,000 American lives lost during World War I. And the model's high end neared the realm of possibility that Americans lost to the virus could approach the 291,000 Americans killed in World War II.
In the UK, government ministers are under growing pressure to increase the rate of testing for coronavirus, as a 13-year-old boy became the first known child in the UK to die with the disease.
A 19-year-old with no existing medical issues has also died and the UK saw its biggest day-on-day rise in the number of deaths since the outbreak began – up 381 on 24 hours previously to a total of 1,789.
Currently about 8,000 tests a day are being carried out, despite ministers having previously claimed to have met a target of 10,000 a day. A further target of 25,000 tests a day is not now expected to be reached until the end of April. In contrast, Germany is testing about 70,000 a day.
While Covid-19 continues to wreck havoc on the US and Europe, data showed China returned to broadly stable manufacturing activity during March.
The Chinese headline seasonally adjusted purchasing managers' index rose to 50.1 in March from a record low of 40.3 in February. This marked a strong improvement from the previous month when the nation imposed strict measures to stem the spread of Covid-19.
Any score above 50 represents expansion, while one below contraction.
Looking ahead, business confidence regarding the one-year outlook for output held close to February's five-year high, with many firms in China optimistic that demand will pick up once the pandemic situation improves.
In Japan, however, the manufacturing sector fell further into contraction in March, to a nine-year low.
The Jibun Bank Japan manufacturing purchasing managers' index fell to 44.8 in March from 47.8 in February. This was its lowest mark since April 2011, which was in the immediate aftermath of the tsunami that struck the island that year.
In the economic calendar for Wednesday, there are manufacturing PMIs from Germany, the eurozone and the UK at 0855 BST, 0900 BST and 0930 BST respectively. Eurozone unemployment is at 1000 BST.
In the afternoon is US ADP employment change, at 1315 BST, a precursor to Friday's monthly jobs report. The US manufacturing PMI from IHS Markit is at 1445 BST and the ISM PMI at 1500 BST.
Against the yen, the dollar was quoted at JPY107.59 early Wednesday versus JPY107.63 late Tuesday.
Sterling was quoted at USD1.2343 early Wednesday, lower than USD1.2435 at the London equities close on Tuesday. The euro traded at USD1.0973, soft versus USD1.0996.
Gold was quoted at USD1,594.01 an ounce early Wednesday, lower than USD1,609.09 on Tuesday. Brent oil was trading at USD25.38 a barrel early Wednesday, slipping against USD26.61 late Tuesday.
UK banks were among the worst hit in the FTSE 100 early Wednesday, with HSBC down 8.0%, Lloyds Banking down 6.4%, Standard Chartered down 6.2%, Barclays down 6.1%, and Royal Bank of Scotland down 2.2%.
The UK's major banks on Wednesday all confirmed the suspension of shareholder returns following a request from the Prudential Regulatory Authority.
The PRA late on Tuesday said it "welcomed" a decision by large UK banks to suspend dividends and buybacks until the end of 2020 and also cancel any dividends for 2019 yet to be paid. This followed a request by the regulator for the banks to preserve cash amid the economic uncertainty posed by Covid-19. The PRA noted the banks are "strong" financially with the capacity to weather severe economic shock.
Carnival was was 9.5% lower. Moody's Investors Service downgraded the cruise operator's senior unsecured ratings to Baa3 from Baa1.
"The downgrade to Baa3 reflects the unprecedented impact the global spread of the coronavirus is having on the cruise industry, including the suspension of all sailing operations for Carnival's brands for at least 30 days," stated Pete Trombetta, Moody's lodging and cruise analyst.
At the same time, Moody's assigned a Baa2 rating to the company's planned USD3.0 billion senior secured note issuance. The ratings are on review for downgrade.
Autotrader, meanwhile, slipped 3.9% on news of a planned equity raise to strengthen its balance sheet.
The FTSE 100 firm will place up to 46.5 million shares through a bookbuild which kicks off on Wednesday. Auto Trader said the pricing will be determined by the company and Bank of America Corp, which is acting as the bookrunner.
On its trading, the company said its results for the year ended March 31 will be "broadly in line with the market consensus", but it cannot provide guidance for financial 2021 due to uncertainty caused by the virus crisis.
In the FTSE 250, Qinetiq was down 4.4% after saying it has continued to perform in line with expectations, but wants to "adopt a prudent course of action" and postpone a decision on a full-year dividend due to Covid-19.
The defence firm said that following on from a strong first half it continued to perform in line with forecasts during the remainder of the financial year, which ended on Tuesday, despite Covid-19.
"With a strong balance sheet and order backlog of nearly GBP3bn we enter FY21 from a position of strength, however we are realistic that restrictions imposed by governments internationally to counter the spread of Covid-19 will have an impact on revenues," said QinetiQ.
The firm has decided to postpone a decision on proposing a final dividend until later in the year, when there is greater clarity.
By Lucy Heming;Â lucyheming@alliancenews.com
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