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(Alliance News) - Stock prices in London opened in negative territory on Friday morning, amid Chinese plans for a controversial new security bill to be inserted directly into Hong Kong's constitution.
The FTSE 100 index was down 99.85 points, or 1.7%, at 5,915.40 on Friday. Since the week began, the blue-chip index is up 2.7%, but is down 22% so far in 2020.
The mid-cap FTSE 250 index was down 298.76 points, or 1.8%, at 16,087.20, and the AIM All-Share index was down 0.6% at 834.63.
The Cboe UK 100 index was 1.8% lower at 9,988.95. The Cboe 250 was down 1.8% at 13,689.30, and the Cboe Small Companies down 0.1% at 11,631.55.
In mainland Europe, the CAC 40 in Paris was down 1.2%, while the DAX 30 in Frankfurt was down 1.4%.
The Hang Seng index in Hong Kong is down 5.0% in late trading. Elsewhere in China, the Shanghai Composite closed down 1.4%. In Japan, Tokyo's Nikkei 225 index closed down 0.8%.
China has launched one of its fiercest assaults on Hong Kong's treasured autonomy with its move to impose a security law, pro-democracy campaigners said Friday as they vowed to take to the streets in protest.
The proposal for the security law – expected to ban treason, subversion and sedition – was introduced into China's rubber-stamp parliament at the opening of its annual session on Friday morning.
It followed repeated warnings from China's communist leaders they would no longer tolerate dissent in Hong Kong, a semi-autonomous city that endured seven months of massive pro-democracy protests last year.
Hong Kong has been allowed a limited form of autonomy since returning from British to Chinese rule in 1997, with those unique freedoms enshrined under a "One Country, Two Systems" handover agreement.
However, a huge pro-democracy movement has built in the face of fears China has been steadily eroding those freedoms.
Activists said the planned national security law, if implemented, would be one of the most significant erosions of Hong Kong's liberties since 1997.
The US reacted swiftly to China's announcement, with State Department spokeswoman Morgan Ortagus warning that imposing such a law on Hong Kong would be "highly destabilising, and would be met with strong condemnation from the US and the international community".
President Donald Trump gave a vague initial response that nevertheless warned of a stronger reaction. "I don't know what it is, because nobody knows yet. If it happens, we'll address that issue very strongly," Trump said.
In commodities, gold was quoted at USD1,734.10 an ounce early Friday, lower than USD1,749.03 late Thursday. Brent oil was at USD34.03 a barrel, down from USD36.18.
"Oil has dropped 5% in early trade, snapping an impressive 6 session winning streak, on the back of worsening US – China relations and China's commission of a GDP target," said Fiona Cincotta at City Index.
China took the rare move of not setting an annual growth target this year after the coronavirus battered the world's second-largest economy and ravaged global growth, Premier Li Keqiang said Friday.
Instead, given "great uncertainty" caused by the Covid-19 pandemic, Beijing will "give priority to stabilising employment and ensuring living standards", he told the opening of the National People's Congress.
He also announced that China's fiscal deficit was expected to be over 3.6% of gross domestic product this year, with a deficit increase of CNY1 trillion - or USD140 billion over last year.
Against the yen, the dollar was trading at JPY107.46 early Friday in London, marginally down from JPY107.85 late Thursday.
The pound was quoted at USD1.2210 early Friday, soft from USD1.2250 at the London equities close Thursday. The euro was at USD1.0926 early Friday, soft from USD1.1008 late Thursday.
Retail sales in the UK fell by a record in April, following widespread store closures to combat the spread of Covid-19, the Office for National Statistics said Friday.
The volume of retail sales in April plunged 18% versus the previous month, following a 5.2% drop in March. Year-on-year, retail volumes were down 23%.
In April, both value and volume retail measures had record declines - from 1988 when records began - the ONS said, as many stores paused trading from March 23 following official government guidance during the coronavirus pandemic.
The statistics office noted the index was last at this level in December 2005.
On the LSE, Burberry was leading the FTSE 100 index, up 2.3% in early trade, after reporting that it was performing well prior to the onset of Covid-19, which resulted in store closures and annual profit dropping as it took impairments.
The luxury fashion house delivered revenue of GBP2.63 billion in the 52 weeks ended March 28 compared to GBP2.72 billion the year prior. Pretax profit dropped to GBP168.5 million from GBP440.6 million year-on-year.
Burberry highlighted that it had seen "strong" momentum in brand, product and sales before the Covid-19 outbreak, ahead of its previous expectations. Comparable sales grew by 4% in the first nine months of its financial year, but dropped by 27% in the final quarter, with around 60% of retail stores closed at end of March.
The outbreak of Covid-19 towards the end of the period impacted profitability and cash generation, it said, and it skipped paying a final dividend as a result.
Hikma Pharmaceuticals was also in the green, up 0.8%. The generic pharmaceutical company said its US subsidiary has received approval from the US Food & Drug Administration for its Icosapent ethyl capsules, the generic equivalent to Vascepa.
Brian Hoffmann, president of Generics, said: "The approval for our generic version of Vascepa is an important milestone towards bringing this product to market. This approval demonstrates the strength of our regulatory capabilities and our commitment to provide patients and healthcare providers in the US with the high-quality medicines they need."
On the other side of FTSE 100 index was easyJet, down 3.7% in morning trading, after its largest shareholder Stelios Haji-Ioannou - holding 34% stake - submitted questions for Friday's sure-to-be-testy general meeting.
These questions are directed at each and every one of the directors individually, Haji-Ioannou's easyGroup said. The questions cover Airbus controlled shares, links with certain Swiss lawyers and whether easyJet is a "going concern".
On Tuesday last week, Haji-Ioannou said he is willing to offer GBP5.0 million to anyone with information that could stop the carrier's GBP4.5 billion aircraft order from manufacturer Airbus. It was the latest bizarre twist in a battle that has seen Haji-Ioannou routinely lambaste easyJet's top team, including Chair John Barton, Chief Executive Officer Johan Lundgren, and Chief Financial Officer Andrew Findlay.
He is seeking to have them ousted at Friday's meeting.
United Utilities also was among the worst blue-chip performers, down 3.0%, after saying that pretax profit dropped to GBP303.2 million from GBP436.2 million, due to an increase in operating expenses to GBP1.23 billion from GBP1.18 billion.
More positively, United Utilities reported revenue growth to GBP1.86 billion in the year to the end of March from GBP1.82 billion.
The water and wastewater services provider lifted its dividend for the year to 42.60p from 41.28p paid a year earlier. United Utilities noted that intends to review its dividend policy going forward, after a clearer picture of the post-Covid-19 economic environment emerges.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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