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(Alliance News) - The FTSE 100 suffered its biggest intraday fall since the Brexit referendum in 2016, joining a global stock market sell-off as the spread of coronavirus continued to widen.
Around 2,800 people have died in China and more than 80,000 have been infected. There have been more than 50 deaths and 3,600 cases in dozens of other countries, raising fears of a pandemic.
With 14 deaths and 528 infections, Italy is by far the European country worst affected by the COVID-19 outbreak. It has also been a point of contagion with many cases in other countries involving people who returned home after travelling in infection-hit areas of northern Italy.
In Japan, Prime Minister Shinzo Abe called for school closures to prevent the spread of the illness, while French President Emmanuel Macron warned the country is "facing a crisis, an epidemic that is coming".
The virus continues to spread across the globe, with Brazil reporting Latin America's first case, and Greece, Georgia, Norway and Pakistan following suit.
The FTSE 100 index closed down 246.07 points, or 3.5%, at 6,796.40. The large cap index, which closed up 0.4% at 7,042.47 on Wednesday, fell to an intraday low of 6,729.99 in afternoon trade - its lowest level in 13 months and down 10% from its peak in mid-January.
The FTSE 250 ended down 839.50 points, or 4.1%, at 19,783.45, and the AIM All-Share closed down 24.20 points, or 2.7%, at 886.96.
The Cboe UK 100 ended down 3.4% at 11,516.62, the Cboe UK 250 closed down 3.9% at 17,848.68, and the Cboe Small Companies ended down 2.1% at 11,810.50.
In Paris the CAC 40 ended down 3.3%, while the DAX 30 in Frankfurt ended 3.2% lower.
"The coronavirus contagion is a rapidly evolving situation and fears of its spreading are intensifying as multiple reports of cases emerging across the globe add to the sense of panic. Clearly it is serious, and unfortunately there have been a number of deaths reported. At this point, the lack of understanding of the virus and how far it could spread generates fear, and this fear of the unknown is impacting on stock markets across the world," Willis Owen's Adrian Lowcock said.
"Up until this week markets were fairly relaxed about it as they hoped the impact was limited to China and thus the feed through to global growth would be short term and limited. That's changed now there have been significant breakouts in Italy particularly, and today a concerning case in the US. This has undoubtedly raised the possibility that it will become a global issue, and if this comes to pass this will have a much bigger impact on global growth and hit company profits," Lowcock added.
On the London Stock Exchange, Hikma Pharmaceuticals ended the best blue chip performer, up 4.3% after the drugmaker said it delivered a positive financial performance in 2019.
Hikma said group revenue in 2019 rose 7% to USD2.2 billion, compared to USD2.07 billion in 2018, reflecting good growth in each of the three business. Pretax profit grew to USD493 million from USD293 million in 2018, also reflecting strong performance of its three business segments.
By division, Injectables revenue grew 8% to USD894 million, "driven by strong demand" for the company's portfolio.
The company declared an annual dividend of 44 cents per share, an increase from 38 cents per share in 2018. The final dividend 30 cents, up from 26 cents. Looking ahead, the company said it expects its three business segments to grow in 2020. Hikma said it does not currently anticipate any material impact from coronavirus, since it does not have extensive operations in China.
Rentokil Initial closed up 0.5% after the pest control company upped its dividend by 15% following a "strong" annual performance in which it beat revenue growth targets. Rentokil declared a final dividend of 3.64 pence per share, taking the total to 5.15p, just over 15% higher than the payout in 2018.
The company swung to a pretax profit of GBP338.5 million, after a loss of GBP114.1 million in 2018. Rentokil's figure last year had been hit by a pension settlement worth nearly GBP350 million. Adjusted pretax profit was 11% higher at actual exchange rates, an 9.8% at constant currency, at GBP340.9 million. Rentokil achieved 9.8% revenue growth at actual exchange rates to GBP2.71 billion, with constant currency revenue growth 8.5%. Organic revenue growth was 4.5%, beating Rentokil's medium-term target of 3% to 4% annual organic growth.
Looking ahead, Rentokil said it has made a "good" start to 2020, and it has maintained medium-term growth targets.
At the other end of the large cap index, WPP ended the worst performer, down 16% after the advertising agency posted a double-digit profit slump.
From continuing operations, revenue for 2019 was up 1.4% to GBP13.23 billion from GBP13.05 billion, but pretax profit slumped 22% to GBP982 million from GBP1.26 billion.
The profit hit was largely due to it booking a GBP68.4 million hit from the revaluation of financial instruments, compared to a GBP169.4 million gain in 2018. Billings meanwhile, slipped 0.3% to GBP53.06 billion GBP53.22 billion. Like-for-like billings were down 1.0% in 2019.
For 2020, WPP expects revenue less pass-through costs to be flat year-on-year, although WPP said this guidance was made prior to any impact from the coronavirus outbreak.
"After a year of consolidation and modest progress, 2020 was supposed to be the year when CEO Mark Read really started to deliver, joined by newly appointed finance chief John Rogers. He is off to a very ropey start after reporting that underlying revenue slumped rather alarmingly in the fourth quarter of last year. The best investors can hope for now is zero growth and maintained margins in 2020. The targets for 2021 have been maintained but the market's patience appears to have snapped," said AJ Bell's Russ Mould.
In addition, travel stocks continued their freefall with TUI ending down 8.2%, easyJet down 4.2% and International Consolidated Airlines down 7.9%. The FTSE 350 travel & leisure sector closed down 4.8%.
Persimmon closed down 6.3% after the housebuilder's annual profit missed market expectations, with revenue and new home sales declining as the group prioritised the quality of sales over quantity.
In addition, Persimmon announced Chief Executive David Jenkinson will step down in due course, staying "for as long as the business requires".
For 2019, Persimmon reported pretax profit of GBP1.04 billion, down 4.6% from the year before, on revenue that declined by 2.4% to GBP3.65 billion. During the year, Persimmon delivered 15,885 new homes to customers, down 4% from 16,449 the prior year, but at an average selling price of GBP215,709, up marginally year-on-year.
The revenue decline was due to a lower volumes of homes sold, as Persimmon delayed sales releases in higher demand locations to later stages of construction in order to improve the quality of the group's homes.
The pound was quoted at USD1.2867 at the London equities close, down from USD1.2920 at the close Wednesday.
Analysts at FXPro told Alliance News: "The jump in new coronavirus cases outside of China sends key stock indices one after another to the correction territory when the drop from the peak exceeds 10%. Under these conditions, the thirst for the so-called safe havens increases sharply. In the currency markets of Britain and the United States, there is a rapid reassessment of prospects towards new rate cuts soon.
"Fear of the spread of coronavirus lead FTSE 100 to collapse by more than 3.3% on Thursday, and increased speculation around an imminent reduction in UK rates weakens the pound against the euro and to a lesser extent against the dollar."
Meanwhile, sterling's fall was compounded by fears UK Prime Minister Boris Johnson could walk away from trade talks with the EU in June unless there is the "broad outline" of a deal.
The UK's guidelines for the negotiations, which cover trade and other aspects of the future relationship with Brussels, sets the deadline for progress against a backdrop of deep divisions between the two sides over issues including fish, state subsidies and standards.
The UK government set out its plans for the talks ahead of the first round of negotiations on Monday, making clear that it "will not negotiate any arrangements in which the UK does not have control of its own laws and political life".
The euro stood at USD1.0984 at the European equities close, up from USD1.0866 late Wednesday. Against the yen, the dollar was trading at JPY110.58, flat from JPY110.52 late Wednesday.
Stocks in New York were sharply lower at the London equities close amid fears the coronavirus will lead to a recession in the world's largest economy.
Moreover, the losses came after US public health officials confirmed a coronavirus case in Solano County, California, the first affliction of unknown origin.
The DJIA was down 2.4%, the S&P 500 index down 2.5% and the Nasdaq Composite down 2.8%.
Yields on US Treasuries, which fall when prices rise, dropped below 1.26% for 10-year debt and 1.75% for the 30-year Treasury bond, as the as the coronavirus spread outside China - despite infections inside China starting to slow.
"Based solely on the yield curve, the odds of a recession have rebounded to more than 30%. But the strength of US building permits, albeit in part due to unseasonably warm weather, suggests the recession odds have fallen below 10%. The manufacturing data had also been improving, at least up to January, with the bounce-back in the ISM new orders index pointing to a lower recession risk," Capital Economics analysts said.
On the economic front, the US economy expanded at an unrevised annual rate of 2.1% in the fourth quarter, data from the Bureau of Economic Analysis showed.
The reading also matched the third quarter growth rate of 2.1%.
In addition, the personal consumption expenditures price index increased 1.3% in the fourth quarter, compared with an increase of 1.5% in the third. Excluding food and energy prices, personal consumption expenditure were up 1.2% versus 2.1% in the three months to September.
Brent oil was quoted at USD51.32 a barrel at the London equities close from USD54.45 at the close Wednesday. The North Sea benchmark - down for the fifth successive session - fell to an intraday low of USD50.96 in afternoon trade, its lowest level since December 2018.
Gold was quoted at USD1,655.10 an ounce at the London equities close, higher against USD1,637.00 late Wednesday, as demand for the safe haven asset increased amid virus fears.
The economic events calendar on Friday has Germany unemployment and inflation data at 0855 GMT and 1300 GMT respectively In the afternoon, there is US personal consumption expenditure figures at 1330 GMT - the core reading is the Fed's preferred gauge of inflation.
The UK corporate calendar on Friday has annual results from stock exchange operator London Stock Exchange Group, airline operator International Consolidated Airlines Group, Irish building materials firm CRH, property portal Rightmove and from jet engine maker Rolls-Royce Holdings.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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