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(Alliance News) -Â The FTSE 100's gains slowly slipped away on Monday as hopes for central bank stimulus to combat economic disruption caused by the Covid-19 virus were overshadowed by the OECD downgrading its global growth forecast for this year.
The FTSE 100 index was just 0.51 of a point higher at midday in London at 6,581.12, slipping back after trading as high as 6,775.18 in the morning. The FTSE 250 was down 131.39 points, or 0.7%, at 19,199.53, and the AIM All-Share was up 0.7% at 862.23.
The Cboe UK 100 was down 0.2% at 11,095.62, the Cboe UK 250 was down 1.4% at 17,166.48, and the Cboe Small Companies up 0.2% at 11,400.10.
In European equities on Monday, the CAC 40 in Paris was down 0.4%, while the DAX 30 in Frankfurt was down 0.7%.
The coronavirus outbreak will have a major impact on economic growth worldwide this year, the OECD warned on Monday, as it lowered its global GDP forecast by half a percentage point to 2.4%, the lowest rate since the 2008-09 financial crisis.
That forecast assumes the virus outbreak fades this year, but a more severe outbreak "would weaken prospects considerably", the group of free-market economies said.
Already the global economy risks an outright contraction in the first quarter, the OECD said, in its first comprehensive study of the impact on the world's major economies.
In China, where the virus dubbed Covid-19 emerged in December, annual GDP growth is expected to reach just 4.9%, a 0.8 point drop from the OECD's original growth forecasts announced last November.
This update from the OECD came after the Bank of Japan said it "will strive to provide ample liquidity and ensure stability in financial markets" to divert risks linked to instability in global markets caused by the spread of the disease.
Federal Reserve Chair Jerome Powell on Friday said the US central bank was following developments in the virus outbreak and said it "will use our tools and act as appropriate to support the economy".
IG senior market analyst Joshua Mahony commented: "With Italy planning to loosen the fiscal purse-strings, and the Japanese buying yet another tranche of Japanese ETFs, it looks likely that all countries will stimulate as much as possible to avert any complete economic collapse."
The virus has now infected more than 88,000 people and spread to over 60 countries after first emerging in China late last year.
South Korea, the biggest nest of infections outside China, reported nearly 500 new cases on Monday, bringing its total past 4,000. Infections nearly doubled over the weekend in Italy, Europe's hardest hit country with nearly 1,700 cases.
The disruption stemming from the virus in China was apparent in the latest PMI figures released overnight. Caixin's manufacturing purchasing managers' index slumped to 40.3 points, a sharp fall from 51.1 in January, and well below the 50.0 mark which separates growth from decline.
The manufacturing picture was brighter in Europe, however.
The IHS Markit eurozone manufacturing PMI rose to 49.2 in February from 47.9 in January, recording a one-year high and second successive monthly rise. However, the figure remained below the neutral 50 mark, meaning continued contraction in the sector.
The UK's PMI rose to 51.7 in February from 50.0 in January, marking the fastest output growth since April 2019. The reading was, though, slightly below the flash figure of 51.9.
February saw the level of new work received expand for the second month in a row, while the rate of increase ticked up to an 11-month high amid reduced political uncertainty. Less positively was overseas demand weakening for the fourth consecutive month. Firms reported reduced new work intakes from Asia, in particular China, due to the outbreak of Covid-19.
Still due on Monday is the IHS Markit manufacturing PMI for the US at 1445 GMT followed by the ISM's manufacturing report at 1500 GMT.
US futures were slipping on Monday, with the Dow Jones now pointed up 0.1%, having earlier in the European day been seen opening 0.9% higher. The S&P 500 index is set to dip 0.2% and the Nasdaq Composite rise 0.3%.
While London stocks attempted to rebound, travel firms continued to be hard hit amid worries over demand from holidaymakers.
British Airways parent International Consolidated Airlines was the worst blue-chip performer, down 10%, while cruise operator Carnival was down 6.2% and easyJet down 4.2%.
Meanwhile, J Sainsbury was among the risers, up 3.4%, after Bernstein raised the supermarket to Outperform from Market Perform.
Berenstein also raised Wm Morrison Supermarkets to Outperform from Market Perform, with the grocer up 2.6%.
In the FTSE 250, Hiscox was up 3.3% after the insurer raised its annual dividend, even as annual pretax profit more than halved due to large catastrophe events.
For 2019, pretax profit dropped by 61% to USD53.1 million to USD135.6 million the year before. The Pembroke, Bermuda-based insurer said profit was dented by large catastrophes, with USD165 million reserved for hurricane Dorian in the Bahamas and typhoons Faxai and Hagibis.
Hiscox declared a final dividend of 29.60 cents per share, bringing the total payout to 43.35 cents, up 3.6% from 41.85 cents in 2018.
Looking ahead, Hiscox said it was too early to estimate the impact of the coronavirus, stating that its main areas for exposure were in event cancellations, travel and personal accidents, for which the group has received only small claims to date. As for the UK floods, the group said it has had 112 claims, of which over 50% are reinsured with Flood Re, a government-backed flood insurance programme.
As a result, Hiscox said net losses are well within its expected catastrophe loss budget for the first-quarter of 2020.
By Lucy Heming;Â lucyheming@alliancenews.com
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