(Alliance News) - London stocks were in free-fall at midday on Thursday after President Donald Trump's stimulus measures for the US to deal with the recently declared coronavirus pandemic disappointed and his European travel ban grounded airline stocks.
Focus turns to the European Central Bank to see what easing measures it will set out to help bolster the eurozone economy in the wake of the damage done by the virus, especially in Italy.
The FTSE 100 index was down 346.41 points, or 5.9%, at 5,530.11 Thursday midday. So far this week, London's blue-chip index has slumped around 14% and in early trade on Thursday hit 5,482.93, the worst level since mid-2012.
The mid-cap FTSE 250 index was down 1,139.73 points, or 6.9%, at 16,199.50. The AIM All-Share index was down 5.4% at 754.66.
The Cboe UK 100 index was down down 5.7% at 9,365.88. The Cboe 250 was down 7.3% at 14,213.29, and the Cboe Small Companies down 2.9% at 10,296.80.
"If President Trump's speech from the Oval office last night was intended to reassure markets that the US administration was on the ball when it comes to dealing with Covid-19 in the US it missed the mark by a mile. If anything, it spoke to a US administration in denial about the challenges being faced within the US," said Michael Hewson at CMC Markets.
Trump on Wednesday announced measures meant to shore up an economy reeling from the new coronavirus pandemic, while simultaneously downplaying the situation.
He also imposed a travel ban on mainland Europe for 30 days and stated trade would be halted, although he later backtracked on trade.
While insisting the US economy remained strong, Trump urged Congress "to provide Americans with immediate payroll tax relief" to help counter the impact of the outbreak.
Trump's announcement came after the World Health Organization declared the global coronavirus crisis a pandemic.
CMC's Hewson said Trump's fiscal measures "don't appear to go far enough".
Ahead of the US open, Wall Street is pointed towards a bleak start. The Dow Jones is called down 5.0%, the S&P 500 down 4.6% and the Nasdaq Composite down 4.8%.
In Europe, travel stocks were lower after Trump's ban on visitors from mainland Europe. Anglo-German operator TUI was down 14% in London, while cruise company Carnival sank 13%.
International Consolidated Airlines, which owns British Airways and Iberia in Spain, was down 9.4%. In Frankfurt, Lufthansa was down 9.8% and in Paris, Air France KLM slid 8.7%.
In mainland Europe, the CAC 40 index in Paris was down 6.0% while the DAX 30 in Frankfurt was 6.1% lower on Thursday.
Eyes and ears are now on the European Central Bank and what economic stimulus it can provide in the wake of the health crisis.
Many economists expect the ECB to boost its portfolio of cheap loans to banks, known as TLTROs, which offer more favourable conditions for lenders the more credit they pass on to the real economy. The bank could also cut the deposit cut by 10 basis points to hit minus 0.6%.
An increase in the ECB's quantitative easing programme, currently running at EUR20 billion a month, could prove more controversial.
"If such [a QE expansion] was to take place, it may well be targeted at corporates or other non-government debt. However, we would suggest that such an expansion is not fully priced and so this is arguably the key part of the meeting when it comes to surprising the market," said Rabobank.
The ECB will announce its latest policy decision at 1245 GMT followed by a press conference with President Christine Lagarde at 1330 GMT.
The central bank's decision comes after the Bank of England cut rates in a surprise move on Wednesday, following the US Federal Reserve's unexpected cut last week.
The euro traded at USD1.1217 on Thursday ahead of the ECB, lower than USD1.1264 late Wednesday.
Sterling was quoted at USD1.2721 on Thursday, lower than USD1.2880 at the London equities close on Wednesday. Against the yen, the dollar was quoted at JPY103.71 versus JPY104.94.
Gold was quoted at USD1,641.49 an ounce on Thursday, lower than USD1,649.40 late Wednesday. Brent oil was priced at USD33.13 a barrel, down from USD36.02.
Turning to individual London listings, Finablr shares sank 59% after the foreign exchange business warned on its cash position.
Abu Dhabi-headquartered Finablr, which owns the Travelex currency exchange brand, is taking "urgent" steps to look into liquidity and cash flow.
This has been hit by a number of issues, Finablr said, including the spread of Covid-19 around the world, a recent credit downgrade on Travelex's bonds, a liquidity squeeze, and a perception in the market that NMC Health's governance issues also relate to Finablr.
"Due to the fast-moving nature of the events and circumstances referred to above, the company is urgently seeking to complete its assessment of its liquidity and cash flow position and negotiate the steps that are necessary to address its short- and longer-term financing needs," Finablr said.
Cineworld shares plummeted after the movie house chain posted a lower profit in 2019 and warned it could risk breaking financial covenants in a worse-case Covid-19 scenario.
London-based Cineworld said profit fell by two-thirds to USD212.3 million in 2019 from USD349.0 million, due to biting finance expenses which more than doubled from 2018. This was largely due to a lease liability interest charge of USD304.2 million compared to USD6.9 million in 2018.
There was, however, a 6.1% rise in revenue to USD4.37 billion from USD4.12 billion, though Cineworld cautioned that on a pro-forma basis, revenue slipped from 2018.
In a worst case Covid-19 downside scenario, the company said that should it lose out on the equivalent of between two and three months worth of revenue, it could be at risk of breaking financial covenants, unless a waiver pact is reached with a majority of its lenders.
Go-Ahead was down 24% after the bus and train operator warned that passenger revenue in recent weeks has been hurt by Covid-19.
In the six months ended December 28, Go-Ahead's revenue rose 2.7% to GBP1.97 billion from GBP1.92 billion.
Pretax profit rose 11% to GBP49.0 million from GBP44.2 million. However, not including an exceptional charge of GBP16.8 million from the year prior, pretax profit fell 20% from GBP61.0 million. Finance costs in the first half of the current year more than doubled to GBP13.4 million.
Go-Ahead said in recent weeks, passenger revenue was been hurt by "adverse weather" and areas "most exposed to tourism" have been hurt by the virus spread.
One of the few risers on the London Stock Exchange was Moss Bros, jumping 51% at 20.69 pence after agreeing a takeover offer by the owner of Crew Clothing.
The acquisition is by Brigadier Acquisition Co Ltd, which is majority-owned by Regiment Acquisition Co, which is in turn majority-owned by Shina, who owns Crew Clothing.
Brigadier Acquisition will be paying 22p per share for Moss Bros, which is a 61% premium to London-headquartered Moss Bros' closing price of 13.7p in London on Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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