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(Alliance News) - Stock prices in London are seen opening lower on Monday, as investors fret over signs of a second wave of coronavirus infections in China and BP set out the costs of the pandemic to one of UK's biggest companies.
Oil major BP said it will take charges of up to USD17.5 billion amid weak demand and lower prices.
In other early UK company news, distribution firm Bunzl said it expects revenue in the first half of 2020 to increase by around 6%, but remained cautious over its outlook.
IG futures indicate the FTSE 100 index is to open 145.98 points, or 2.4%, lower at 5,969.20. The blue-chip index closed up 28.48 points, or 0.5%, at 6,105.18 on Friday.
BP said it sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a "sustained period".
Further, BP believes there are growing expectations that the aftermath of the pandemic will accelerate the pace of transition to a lower-carbon economy and energy system, as countries seek to "build back better" so that their economies will be more resilient in the future.
The energy company has revised its long-term price assumptions, lowering them and extending the period covered to 2050 so that it is now consistent with its long-term target of becoming a net zero company by 2050.
BP said this will lead to non-cash impairment charges and write-offs in the second quarter of 2020, estimated to be in an aggregate range of USD13 billion to USD17.5 billion post-tax.
In addition, BP has revised investment appraisal long-term price assumptions which are now an average of around USD55 a barrel for Brent from 2021 to 2050.
"We have reset our price outlook to reflect that impact and the likelihood of greater efforts to 'build back better' towards a Paris-consistent world. We are also reviewing our development plans. All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions - rooted in our net-zero ambition and reaffirmed by the pandemic - will better enable us to compete through the energy transition," BP Chief Executive Bernard Looney said.
Distribution and services firm Bunzl said its "resilient business model" is expected to deliver a strong performance in the half-year period to June 30, against the background of challenging trading conditions due to the Covid-19 pandemic.
Bunzl said interim revenue is expected to increase by around 6% at both actual and constant exchange rates.
In addition, Bunzl's overall operating margin is expected to be modestly higher than the comparable period last year, due to a change in the mix of products sold during the period, including a higher proportion of imported own-brand products.
Bunzl said there has been no significant change in its financial position during the first half and continues to have substantial funding headroom available, with strong cashflow and a robust balance sheet.
However, it is cautious on its second-half outlook due to the coronavirus pandemic and its effect on trading conditions.
"The company remains cautious about the outlook given the risks and uncertainties associated with the emergence of global economies from lockdown and the timing of recovery of the Group's markets in the second half, particularly as the volume of orders for Covid-related products seen during the first half is not expected to be repeated with many customers having already built significant stocks of products for the remainder of the year," Bunzl said.
Metro Bank confirmed a press report over the weekend that it is in talks to acquire peer-to-peer lender RateSetter, but said discussions regarding the potential acquisition are at an early stage.
Sky News had reported that people familiar with the deal said there was no guarantee the talks would result in a deal, and it was unclear what price Metro Bank was offering for RateSetter.
"There can be no certainty at this stage that a formal agreement will be reached, nor as to the terms of any agreement. A further announcement will be made if and when appropriate," Metro Bank said on Monday.
The Japanese Nikkei 225 index ended down 3.0%. In China, the Shanghai Composite is down 0.6%, while the Hang Seng index in Hong Kong is down 1.8%.
China reported its highest daily number of new coronavirus cases in months on Sunday, triggering fears of a second wave of infections as more European countries prepare to reopen their borders.
The shock resurgence in domestic infections has rattled China, where the disease emerged late last year but had largely been tamed through severe restrictions on movement that were later emulated across the globe.
Beijing has carried out mass testing after 36 of China's 57 new cases on Sunday were linked to a wholesale food market in the capital.
The city has raced to quash the new outbreak, issuing travel warnings, closing the market, deploying paramilitary police and putting nearby housing estates under lockdown. The move came as more than a dozen US states, including populous Texas and Florida, reported their highest-ever daily case totals, while Rome has also seen a fresh spike.
"Asian markets moved lower overnight and European bourses are pointing to a weaker start, as fears of a second wave of coronavirus infections drag on risk sentiment. As the number of Covid-19 cases in Beijing jump and the US reports 25,000 new cases a day, investors are waking up to the threat of a second wave and the damage that it could cause to the global economic recovery," City Index analyst Fiona Cincotta said.
The pound was quoted at USD1.2485 early Monday, down from USD1.2527 at the London equities close Friday.
Thousands of non-essential shops across England are reopening their doors to customers for the first time in almost three months in the latest easing of the coronavirus lockdown rules.
With official figures showing the economy shrank by a fifth in April, ministers are desperate to get businesses going again to stave off another wave of job losses.
Chancellor of the Exchequer Rishi Sunak - who is reported to be considering a value-added tax cut to stimulate spending - acknowledged further redundancies were inevitable as the government's furlough scheme begins to unwind.
Ministers are under intense pressure from Conservative members of Parliament to go further by easing the two-metre social-distancing so the hard-pressed hospitality sector can also reopen. UK Prime Minister Boris Johnson confirmed at the weekend that he had ordered a "comprehensive" Downing Street review of the regulation.
Meanwhile, Johnson will meet EU chiefs by video link Monday to try to breathe new life into stalled post-Brexit trade talks, with both sides entrenched in long-held positions. The conference with European Commission President Ursula von der Leyen and European Council Chief Charles Michel will review progress in the talks on future EU-UK relations.
It is the first time Johnson has personally taken part in the talks which began in March, just weeks after Britain left the EU on January 31 after 47 years in the European project.
The euro was quoted at USD1.1241 early Monday in London, firm from USD1.1235 late Friday. Against the yen, the dollar was quoted at JPY107.12, lower than USD107.35
Brent was quoted at USD37.44 a barrel Monday morning, down from USD38.44 late Friday. Gold was trading at USD1,725.72 an ounce, up from USD1,704.02.
The economic events calendar on Monday has eurozone trade data at 1000 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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