Costain Share News (COST)

(Alliance News) - London stocks opened in a cautious mood on Wednesday as markets continue to digest the likely economic fallout from the coronavirus.

"After another decent US session, Asia markets have been slightly more subdued, as investors absorbed a number of sobering economic assessments of the damage that the virus was likely to inflict on the global economy, as well as individual economies in general," said Michael Hewson at CMC Markets.

The FTSE 100 index was down 28.15 points, or 0.5%, at 5,763.16 early Wednesday. The mid-cap FTSE 250 index was down 329.60 points, or 2.1%, at 15,752.97. The AIM All-Share index was down 0.1% at 753.26.

The Cboe UK 100 index was down 0.6% at 9,742.04. The Cboe 250 was down 1.9% at 13,623.70, and the Cboe Small Companies down 0.1% at 8,632.10.

In mainland Europe, the CAC 40 in Paris was down 0.9% while the DAX 30 in Frankfurt was down 0.6% early Wednesday.

"The reaction of Asia markets this morning has been much more subdued and measured, with stock markets eventually drifting lower, which has fed into a similarly subdued open here in Europe, after a rather mixed session yesterday," said CMC's Hewson.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.5%. In China, the Shanghai Composite ended down 0.6%, while the Hang Seng index in Hong Kong is down 1.0% in late trade.

US President Donald Trump announced Tuesday that swaths of the US could lift coronavirus shutdowns "very soon" and made peace with state governors after being accused of acting like a king. The president indicated that numerous states with less dense populations could open "very, very soon, sooner than the end of the month," while places like New York could take longer.

While defusing an extraordinary domestic row, Trump however opened a new front on the international stage when he announced a freeze in US funding to the World Health Organization because he said it had been biased toward China. According to Trump, the WHO prevented transparency over the Covid-19 outbreak when it appeared in China, costing other countries crucial time to prepare, delaying decisions to stop international travel.

Meanwhile, China's economy contracted for the first time in around three decades in the first quarter as the coronavirus crisis brought the country to a standstill, according to an AFP poll of economists. The world's second-largest economy tanked in the first three months of the year as factories closed, consumers were compelled to stay home and the virus spread to other countries.

Analysts from 14 institutions expect China's economy to have shrunk 8.2% from a year ago in the first quarter – the first contraction since quarterly data started to be reported in the early 1990s.

This came after the International Monetary Fund warned on Tuesday that the global economy will contract 3% this year due to the new coronavirus and shutdowns as part of efforts to mitigate the spread. The prediction marked a massive 6.3% swing from previous estimates from January.

Gold slipped back despite Wednesday's cautious mood, though remained at elevated levels.

The safe-haven metal was quoted at USD1,714.34 an ounce early Wednesday, lower than USD1,734.53 on Tuesday but still up more than 4% this week.

Gold miners eased back early Wednesday, with Fresnillo down 2.4% and Polymetal down 0.7%, having both ended among the top performers in the previous session on rising gold prices.

Meanwhile, oil stocks were in the red for a second day. BP shares were down 2.1%, having lost 4.4% on Monday, while Royal Dutch Shell 'A' and 'B' shares were down 2.2% and 2.6% respectively, having fallen 4.3% and 3.5% on Monday.

Brent oil was trading at USD29.81 a barrel early Wednesday, down from USD30.08 late Tuesday, the commodity remaining weak following a disappointing OPEC decision over the weekend.

OPEC producers and their allies agreed on Sunday to cut production by 9.7 million barrels a day, which some analysts think is too timid considering the plunging demand caused by the Covid-19 pandemic.

Rightmove was down 1.6% after RBC cut the property portal to Underperform from Sector Perform.

Spirent was at the top of the FTSE 250, up 5.0% in early trading after confirming it still will pay its 2019 final dividend.

The firm said it delivered "strong results" in the quarter to March 31, with revenue up 12% and "robust" profit growth.

After taking into account strong cashflow in the period, which resulted in a cash balance of USD208 million at the end of March, Spirent said it intends to pay its previously announced 2.70p final dividend. This will be paid at the start of May.

"We have started the year well and our pipeline remains solid. We recognise that the current volatile environment may affect deal timing and as a result, we continue to be extremely vigilant and are taking prudent actions to mitigate risk and delay discretionary expenses. We are keeping a careful eye on customer demand as we monitor the continuing effects of the virus," said Chief Executive Eric Updyke.

Elsewhere in London, Costain shares were up 22% after the UK government gave formal approval for the HS2 railway project to begin the construction phase.

Among UK-listed companies, Costain Group said its Skanska Costain Strabag joint venture received a notice to proceed on the design and construction of phase 1 of HS2 in the southern area. Its work will include designing and building tunnels for the approach of the railway line into London Euston station.

Costain said the contract is worth GBP3.30 billion to the joint venture as a whole, but it won't make a significant contribution to Costain's profit until financial year 2021 onwards. This is because construction is paused during the Covid-19 lockdown.

The economic calendar has US retail sales at 1330 BST and an interest rate decision from the Bank of Canada at 1500 BST.

"The BoC is set to keep rates unchanged at 0.25% today, as Governor Poloz has more than once suggested this is the lower bound for rates. However, markets have likely built some expectations that the Bank will expand its asset purchase scheme, both in size and in qualitative terms," commented ING.

On the corporate side, there are first quarter results from a raft of major US banks due this afternoon, including Goldman Sachs, Bank of America, Citigroup and Morgan Stanley.

Sterling was quoted at USD1.2549 early Wednesday, down from USD1.2597 at the London equities close on Tuesday.

The euro traded at USD1.0955 early Wednesday, soft versus USD1.0962 late Tuesday. Against the yen, the dollar was quoted at JPY107.13, flat on JPY107.15.

By Lucy Heming; lucyheming@alliancenews.com

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