(Alliance News) - Stocks in London were mixed at midday on Friday following a spike in new coronavirus cases outside China, as investors mulled the effect the outbreak will have on company earnings.
There was a rise in new virus cases in South Korea, Iran and Chinese hospitals and prisons reigniting concerns about the spread of the disease that has killed more than 2,200 people.
The World Health Organization warned nations they could face a serious problem if they fail to "hit hard now" against the coronavirus, which has infected more than 75,000 in China and over 1,100 abroad. China pointed to official numbers showing a drop in new cases this week as evidence that its drastic containment measures are working, but fresh cases emerged at two Beijing hospitals and more than 200 other cases in two prisons.
Chinese authorities have placed tens of millions of people under quarantine in hard-hit Hubei province and restricted movements in other cities far from the epicentre. China reported 118 more deaths on Friday, raising the toll to 2,236, most of the them in Hubei. So far, 11 people have now died outside mainland China.
The internationally-exposed FTSE 100 index was down 17.76 points, or 0.2% at 7,418.88, but is on track to end the week up 0.1%.
The more domestic-oriented FTSE 250 was up just 4.56 points at 21,871.64, and the AIM All-Share flat at 976.00.
The Cboe UK 100 index was down 0.3% at 12,568.20. The Cboe UK 250 was down 0.1% at 19,731.66, and the Cboe UK Small Companies was up 0.2% at 12,517.40.
In Paris the CAC 40 was down 0.2%, while the DAX 30 in Frankfurt was down 0.1%.
"While the number of new cases of coronavirus continues to slow in China, the spread outside the country is escalating and it seems the market is waking up to the impact on both individual companies and the wider economy," said AJ Bell's Russ Mould.
"The warnings are also a reminder that the SARS outbreak in 2003 is not necessarily a good point of comparison with events in 2020, given China is now a larger economy with closer links to the rest of the world," Mould added.
On the London Stock Exchange, Russian gold miner Polymetal International was the best blue chip performer, up 2.6%, tracking spot gold prices higher.
Gold was quoted at USD1,634.28 an ounce at midday, up from USD1,621.15 at the London equities close Thursday, as demand for the safe haven asset increased.
At the other end of the large cap index, Pearson was the worst performer, down 4.2% after the education publisher reported disappointing annual results.
Pearson said its sales decreased by 6% in headline terms in 2019 to GBP3.87 billion from GBP4.13 billion a year earlier, with portfolio changes reducing sales by GBP347 million. Pretax profit was lower, at GBP232 million compared to GBP498 million a year ago, hurt by the reduced gains on disposals and higher restructuring charges.
Pearson declared a final dividend of 13.5 pence, up 4% from 13p paid a year earlier. For 2019, payout totalled 19.5p compared to 18.5p paid the year before.
Looking ahead, Pearson said it expects to deliver 2020 adjusted operating profit of between GBP410 million to GBP490 million, excluding the recently sold 25% stake in Penguin Random House. In 2019, adjusted operating profit totalled GBP581 million, up from GBP546 million in 2018.
"These results show there is still plenty of way to go in Pearson's long and painful bid to transform itself into a digital-first publisher. The problem is the publisher had grossly underestimated how quickly students were turning to digital learning materials and now it is paying the price," said eToro analyst Adam Vettese.
In the FTSE 250, Daejan Holdings was the standout performer, up 55% at 8,000p after the company agreed a takeover offer from major shareholder Freshwater Group.
Dock Newco, part of Freshwater, is offering GBP80.50 in cash for each Daejan share. The offer price values the entire issued shares capital of Daejan at GBP1.31 billion and 20.5% of free float shares at GBP269.5 million. Freshwater currently owns 79.5% of entire issued share capital of Daejan.
The financial terms of the offer are final and will not be increased, Dock Newco noted.
The pound was quoted at USD1.2909 at midday, up from USD1.2882 at the London equities close Thursday, after data showed the UK private sector stabilised in February.
The seasonally adjusted IHS Markit/CIPS UK composite output index was unchanged month-on-month in February at 53.3, pointing to the joint-fastest expansion of private sector output since September 2018.
Any reading below 50 indicates contraction, while one above expansion.
The seasonally adjusted IHS Markit/CIPS flash UK manufacturing purchasing managers' index ticked up to 51.9 in February from 50.0 in January, the strongest improvement in overall business conditions since April 2019.
While the flash UK services PMI business activity index posted 53.3 in February, down from 53.9 in January, but still the second highest since September 2018. The slowdown partly reflected weaker demand from abroad, as signalled by a renewed fall in new export orders during February.
Looking ahead, IHS Markit said optimism remained high despite "backdrop of extreme events".
IG Group said: "We are finally seeing the bulls come back into play after a sharp expansion in the manufacturing sector ensured that both manufacturing and services are well clear of the sharp contraction that was evident at the turn of the year. The resolution to both Brexit and election worries seen in early December has had a profound impact, and we can now securely say that the UK economy is returning to some sense of normality."
The euro stood at USD1.0800 at midday, marginally higher from USD1.0794 late Thursday, following a slew of data releases from the continent.
The eurozone saw business activity increase to a six-month high in February, flash estimates from IHS Markit showed.
The IHS Markit flash eurozone composite PMI rose slightly to 51.6 points in February from 51.3 in January. Any reading over 50 indicates expansion. Despite the only modest increase, February's reading marked a six-month high.
The flash services PMI rose slightly to 52.8 in February from 52.5 the previous month, while the manufacturing PMI improved to 49.1 from 47.9, though remaining in contraction territory.
Against the yen, the dollar was trading at JPY111.80, lower than JPY112.10 late Thursday.
Meanwhile, inflation in the eurozone rose in January on an annual basis, but declined month-on-month, data from Eurostat showed.
The eurozone's annual inflation rate, measured by the consumer price index, was 1.4% in January, up from 1.3% in December. The eurozone flash estimate for January, released last month, was 1.4%.
On a monthly basis, inflation fell 1.0% in January, from a 0.3% rise in December. Both readings came in line with consensus estimates.
The European Central Bank targets inflation of "below, but close to, 2% over the medium term".
Stocks in New York were set for a lower open on Friday as investors mulled the effects the coronavirus will have on corporate earnings.
This week, iPhone maker Apple and consumer goods firm Procter & Gamble have warned earnings would take a hit as a result of the spread of the coronavirus.
"It took Apple to do what the coronavirus couldn't - make stocks feel a little queasy," said Stephen Innes of AxiCorp.
The DJIA was called down 0.3%, the S&P 500 index down 0.4% and the Nasdaq Composite down 0.5%.
Brent oil was quoted at USD58.07 a barrel at midday, down from USD59.75 at the London equities close Thursday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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