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(Alliance News) - Stocks in London ended sharply lower on Thursday as flare-ups in coronavirus infections in China and South Korea prompted new fears of a second wave.
Residents of China's pandemic epicentre of Wuhan queued up across the city to be tested for the coronavirus on Thursday after a new cluster of cases sparked a mass screening campaign.
More than 3,800 people have died from Covid-19 in the city, accounting for the vast majority of fatalities in China. The quarantine was only fully lifted in early April, and life is returning to normal.
But Wuhan was given a fresh jolt when several new local infections emerged last weekend after more than a month in which none were reported.
In South Korea, authorities in the capital city of Seoul have ordered more than 2,000 clubs and bars to close again after a new cluster of more than 100 Covid-19 cases was traced to the popular entertainment district of Itaewon.
The FTSE 100 index closed down 162.51 points, or 2.8%, at 5,741.54. The FTSE 250 ended down 473.53 points, or 3.0%, at 15,404.59, and the AIM All-Share closed down 19.10 points, or 2.3%, at 800.67.
The Cboe UK 100 ended down 2.8% at 9,695.70, the Cboe UK 250 closed down 3.2% at 13,067.60, and the Cboe Small Companies ended down 1.8% at 8,708.30.
In Paris the CAC 40 ended down 2.4%, while the DAX 30 in Frankfurt ended down 2.1%.
IG Group said: "Global markets are on the slide once again, with traders once again selling risk-assets as fears over another potential crash in stocks comes into view. The lack of market direction over the past month has been a reflection of the uncertainty that has dominated for traders, with initial optimism over impending moves to ease lockdown measures gradually souring.
"The ability to ignore the huge deterioration in the economic picture can only last for so long, with the reasoning behind such actions likely to come crashing down in the event that the prospect of a meaningful economic bounceback cannot occur. Despite optimistic claims from Donald Trump, recent comments from [Anthony] Fauci, Jerome Powell, and the WHO signal a crisis that is unlikely to be resolved swiftly."
On the London Stock Exchange, 3i Group ended the day as the best blue-chip performer, up 5.4%, after the private equity investor reported a decline in net asset value per share, but maintained its dividend.
3i reported a diluted NAV per share of 804 pence as at March 31, the end of its financial year. This represents a 1.3% drop from year earlier's 815p. As a result, total return for the year was GBP253 million, down from GBP1.25 billion the year before, while return on opening shareholders' funds was 3%, down from 18%.
The company's portfolio value increased 7.3% to GBP8.10 billion on March 31 from GP7.55 billion the prior year, gross debt was flat at GBP575 million, and net cash fell 45% to GBP270 million from GBP495 million. Liquidity was at GBP1.25 billion, having been GBP1.42 billion the year before.
3i maintained its dividend per share at 35p, with a 17.5p per share final dividend scheduled to be paid in July, subject to shareholder approval.
At the other end of the large-cap index, Sage Group ended down 7.1% after Canaccord downgraded the accounting software provider to Hold from Buy.
Prudential closed down 5.3% after the 172-year-old insurer said first-quarter sales in Asia were weighed down by the effects of Covid-19 on mainland China and Hong Kong.
Asia APE sales, excluding Hong Kong and China, were up 1% for the three months ended March 31 compared to a year before, while total Asia APE sales fell 24% to USD986 million. APE sales are "a measure of new business activity that comprises the aggregate of annualised regular premiums and one-tenth of single premiums on new business written during the year for all insurance products, including premiums for contracts designated as investment contracts under IFRS 4," Prudential explained.
Additionally, Prudential is planning a minority initial public offering for its Jackson National Life Insurance Co unit in the US, preparations for which are continuing "alongside active evaluation of other options".
Hargreaves Lansdown closed down 1.7% despite the fund supermarket saying it performed strongly in the first four months of 2020 amid the "exceptionally volatile and challenging period".
In the four months to April 30, Hargreaves recorded GBP4.0 billion of net new business, with 94,000 new clients joining the firm. In the same period last year, Hargreaves recorded GBP2.9 billion in net new business. Net new business growth was driven by the "usual factors", Hargreaves said, of existing clients using tax allowances during the ISA season, ongoing wealth consolidation onto its platform from existing clients and flows into its cash management service, Active Savings.
Despite this, Hargreaves ended the period with GBP96.7 billion in assets under administration, down 8.1% from GBP105.2 billion at December 31. Hargreaves said its current intention is to keep its dividend for financial 2020, due to its "strong" trading results.
Stocks in New York were lower at the London equities close as mounting US unemployment added to worries about a slow economic recovery from coronavirus shutdowns.
The DJIA was down 0.2%, the S&P 500 index down 0.6% and the Nasdaq Composite down 1.0%.
In the latest jobless data, a further three million US workers filed for unemployment in the week to May 9, the figures from the US Department of Labor showed.
Seasonally-adjusted US initial jobless claims were 2.98 million in the week ended May 9, down from a revised 3.18 million the week before - having first been reported as 3.17 million. Consensus, as cited by FXStreet, was for 2.5 million initial jobless claims in the May 9 week.
The latest figures take the number of initial claims filed since the Covid-19 crisis began to bite in March to around 36 million.
Commenting on the data, analysts at Oxford Economics said: "While initial claims for unemployment benefits continue to retreat from their peak, they remain at levels consistent with a labor market in distress. And the headline figures don't tell the full story since they don't capture individuals receiving benefits under state and emergency programs."
The dire US jobs numbers added to investor concerns about the health of the economy after Federal Reserve Chair Jerome Powell on Wednesday warned of a "highly uncertain" outlook for the world's top economy. The central bank head added that lawmakers may have to provide even more stimulus to the USD3 trillion already stumped up to provide support.
The pound was quoted at USD1.2210 at the London equities close, marginally lower from USD1.2222 at the close on Wednesday.
The pound remained under pressure as the dollar appreciated after the US Federal Reserve on Wednesday said it was not considering using negative interest rates to contain the damage the coronavirus outbreak has inflicted on US economy.
Meanwhile, the UK is very sharply moving into recession due to the coronavirus crisis, Bank of England governor Andrew Bailey said late Wednesday.
Bailey's comments echoed those of Chancellor Rishi Sunak after new economic figures showed the economy shrank by 5.8% in March and 2% in the first quarter of the year as a whole.
Pressed on the debate over whether a new round of austerity would be needed to deal with the economic fall-out of the crisis, Bailey said: "Obviously, it's not for the Bank of England to comment on fiscal policy.
"What I would say is that I think there are choices, and I think those choices will be looked at very seriously".
Societe Generale's Kit Juckes said: "After Jay Powell had his session with Adam Posen, we got BoE Governor Andrew Bailey with Robert Peston in ITV. Bailey's message is that if the UK's monetary credibility allows it the leeway to buy gilts and spread the cost of fighting the economic effects of Covid-19 over a longer period of time, then they should be willing to go as far as they can. In other words, keep on buying gilts as long as they don't trigger a sterling crisis.
"The subtext ought to be that QE is more important than negative rates, which could be very counter-productive in the UK's case (less so in the US, on that basis), and the message to the chancellor might be to tread very carefully on raising taxes. But for FX, this is a cap on sterling and an invitation on a day like today".
The euro stood at USD1.0808 at the European equities close, lower from USD1.0845 late Wednesday. Against the yen, the dollar was trading at JPY107.05, flat from JPY107.11 late Wednesday.
Brent oil was quoted at USD30.12 a barrel at the equities close, up from USD29.45 at the close Wednesday.
Oil prices firmed after the International Energy Agency said the easing of lockdowns and output cuts had helped the oil market after "Black April", when US prices collapsed into negative territory on evaporating demand and a vast supply glut.
Gold was quoted at USD1,730.24 an ounce at the London equities close, up from USD1,714.70 late Wednesday.
The economic events calendar on Friday has Germany GDP readings at 0700 BST, eurozone GDP at 1000 BST and US retail sales figures at 1330 BST.
The UK corporate calendar on Friday has a trading statement from bookmaker William Hill and first-quarter results from aviation support services provider Signature Aviation.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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