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(Alliance News) - London stocks took a breather at the open on Wednesday following a strong rally in the previous session, with some caution remaining over the spread of coronavirus in China.
In addition, a profit warning by Imperial Brands weighed on the FTSE 100, offsetting gains for Barratt Developments and Vodafone after their more-upbeat statements.
The FTSE 100 index was down 21.30 points, or 0.3%, at 7,418.52 early Wednesday, having closed up 1.6% on Tuesday.
The mid-cap FTSE 250 index was down just 9.14 points at 21,430.79. The AIM All-Share index was up 0.2% at 962.02.
The Cboe UK 100 index was down 0.3% at 12,564.32. The Cboe 250 was up 0.1% at 19,350.40, and the Cboe Small Companies flat at 12,476.84.
In mainland Europe, the CAC 40 in Paris was down 0.2% while the DAX 30 in Frankfurt was also 0.2% lower early Wednesday.
"After last night's broad risk-rally, Asia's willingness to continue the move has been met with a bit more trepidation," said Bethel Loh, macro strategist at ThinkMarkets.
The confirmed death toll in mainland China from the spread of a new SARS-like virus rose to 490 on Wednesday after hardest-hit Hubei province reported 65 more people had died. The number of coronavirus infections jumped to 24,000.
In a sign of growing concern about a spread to other densely-populated Chinese metropolitan areas, authorities in three more cities, including one near Shanghai, imposed drastic restrictions on movement.
"The truth of the matter is that nCoV's impact remains significant and unknown, and still demands immediate interest from most affected economies. Though, there's a sense that risk assets are turning the page very quickly on the coronavirus narrative, as new novel cases per day slow to under 20% and the recoveries/death ratio rises to 2-for-1 just about," said Loh.
In Asia overnight, the Japanese Nikkei 225 closed up 1.0%. In China, the Shanghai Composite index ended 1.3% higher while the Hang Seng in Hong Kong closed up 0.3%.
As well as caution over the spread of coronavirus, Imperial Brands was weighing on London's FTSE 100 on Wednesday.
Imperial Brands was London's worst blue-chip performer on Wednesday, down 8.5% after warning on earnings in the wake of US vaping regulation.
Tobacco trading remains in line with expectations, the FTSE 100 constituent told its annual general meeting, but group constant currency net revenue is now seen at a "similar level" to last year and adjusted earnings per share are expected to be slightly lower.
This is because of the US Food & Drug Administration's ban on certain flavours of cartridge-base vapour devices, as well as weaker-than-expected consumer demand for vapour.
First half adjusted earnings per share are expected to be down around 10% at constant currency, which the company said is due to the phasing of inventory write-downs, "primarily relating to the US flavour ban".
"Regulatory uncertainty and adverse news flow continues to affect demand in the US and Europe. We estimate this will result in significantly lower year-on-year [Next Generation Product] net revenue as well as increased provisions for slow-moving stock," Imperial said.
Cruise operator Carnival was down 2.3%. At least 10 people on a cruise ship quarantined off the coast of Japan have tested positive for the new coronavirus.
In a statement, Carnival-owned Princess Cruises confirmed the ship would be in quarantine for two weeks and said its planned eight-day round trip had been cancelled. Two more Diamond Princess departures from Yokohama, scheduled for February 4 and 12, had now been cancelled, it added.
Vodafone rose 2.7% as it reiterated full-year guidance after trading came in line with expectations for the third quarter.
For the three months to December 31, organic service revenue growth was 0.8%. Group revenue was up 6.8% to EUR11.75 billion.
The telecommunications firm reiterated its guidance of adjusted earnings before interest, tax, depreciation and amortisation between EUR14.8 billion and EUR15 billion.
Outside of the results, Vodafone said it remains on track to legally separate its European tower infrastructure into a new organisation which will be operational by May 2020, and it is preparing for a potential IPO in "early 2021".
"I am pleased with the pace at which we have executed our commercial and strategic priorities, which has allowed us to maintain our momentum in the quarter. Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa. We expect a further gradual improvement in service revenue growth in Q4, led by Europe," said Chief Executive Nick Read.
Barratt Developments was up 2.3% as the housebuilder achieved a "strong" first half performance as profit rose.
Revenue in the six months to December rose 6.3% to GBP2.27 billion, with pretax profit up 3.7% to GBP423.0 million.
The firm lifted its interim payout by 2.1% to 9.8 pence. Further, Barratt said it has extended its capital return plan and will pay a special return of GBP175 million in November 2021, in addition to the planned GBP175 million payment in November this year.
On current trading, Barratt said the rate of net private reservations per active outlet per average week from the end of its first half to February 2 was 0.83, up from 0.74 a year before.
Domino's Pizza rose 4.3%, reporting sales growth in the fourth quarter, but its international operations continued to lag.
Group system sales were up 3.7% to GBP352.0 million in the 13 weeks to December 29, up 4.1% organically.
UK & Ireland system sales grew 4.4% to GBP326.7 million, up 4.5% organically, while International sales fell 5.0% to GBP25.3 million, down 1.4% on an organic basis.
UK & Ireland operating profit is expected to be "within the range of current market expectations", said Domino's, noting that this range is around GBP102.1 million to GBP104.1 million.
For its international operations, Domino's said it expects a GBP20 million operating loss. The disposal of its international operations is progressing, the company said, with the focus on Norway as a priority.
Still to come in the UK corporate calendar on Wednesday are full-year results from pharmaceutical firm GlaxoSmithKline at 1200 GMT.
In forex, sterling was quoted at USD1.3045 early Wednesday, firm compared to USD1.3026 at the London equities close on Tuesday.
Sterling was firm ahead of a services PMI reading at 0930 GMT.
"We think there may be a risk of a slight downward revision to the UK figure to 52.5 from 52.9, but that wouldn't detract much from its strong pickup from December's final reading of 50.0. These numbers suggest the UK economy may return to (modest) positive growth after what the BoE estimates to have been flat GDP in Q4 2019," said Lloyds Bank.
Also due are services PMIs from Germany at 0855 GMT and the eurozone at 0900 GMT. Eurozone retail sales are at 1000 GMT.
The euro was at USD1.1043 early Wednesday, higher versus USD1.1035 late Tuesday. Against the yen, the dollar was trading at JPY109.35 versus JPY109.43.
In the US on Wednesday, there is the ADP employment report at 1315 GMT and services PMI at 1445 GMT, followed by the ISM non-manufacturing PMI at 1500 GMT.
Among commodities, gold was quoted at USD1,561.35 an ounce early Wednesday, up from USD1,552.50 on Tuesday. Brent oil was trading at USD54.18 a barrel early Wednesday, lower than USD55.00 late Tuesday.
By Lucy Heming; lucyheming@alliancenews.com
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