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(Alliance News) - Stocks in London ended lower on Wednesday with oil stocks weighing on the FSTE 100, while big US banks reported grim earnings due to the coronavirus, painting a bleak picture of the global economy.
The FTSE 100 index closed down 193.66 points, or 3.3%, at 5,597.65.
The FTSE 250 ended 729.41 points lower, or 4.5%, at 15,353.16, while the AIM All-Share closed down 20.86 points, or 2.8%, 733.43.
The Cboe UK 100 ended down 3.4% at 9,469.96, the Cboe UK 250 closed down 5.0% at 13,198.93, but the Cboe Small Companies ended up 0.6% at 8,595.32.
In Paris the CAC 40 ended down 3.7%, while the DAX 30 in Frankfurt ended down 4.2%.
IG Group's Chris Beauchamp said: "A rising US dollar is reflective of the general sense of angst in markets today, as stocks begin to look vulnerable to a pullback after their sizeable rebound from the March lows. Investors are also keeping a nervous eye on oil markets, as the price of that commodity renews its drive lower now that the OPEC+ meeting is out of the way. There is a growing realisation, as many suspected last week, that short of dramatic cuts in the multiple tens of millions of barrels per day, nothing would be enough to appease an oil market that had already seen a huge rally off its own March low.
"So it has proved, with energy stocks taking a hit as well, knocking back the FTSE 100 and the Dow. Oil's woes speak to a broader concern about the global economy that goes far beyond infection rates; if demand for oil, and indeed generally, does not recover quickly as the lockdowns disappear, then the stock market rally of the past four weeks is highly vulnerable to more losses."
On the London Stock Exchange, Ocado Group ended the best blue-chip performer, up 3.9% as the online grocer continued to benefit from increased demand during the coronavirus lockdown.
At the other end of the large-cap index, heavyweight oil majors ended in the red, tracking spot oil prices lower.
Royal Dutch Shell 'A' closed down 6.9%, Shell 'B', down 7.9% and BP down 6.8%.
Brent oil was quoted at USD27.68 a barrel at the equities close, down sharply from USD30.08 at the close Tuesday, following a stark warning from the International Energy Agency.
Global oil demand will fall by a record amount this year as lockdown measures imposed to curb the coronavirus outbreak bring the economy to a virtual halt, the IEA said.
For 2020 overall, demand will fall by 9.3 million barrels per day, with April alone down 29 million barrels a day from a year earlier to levels last seen in 1995, the IEA said in its latest monthly report. However, measures taken to bolster the global economy and to reduce oil supply should allow a "gradual" recovery in the second half of the year, the IEA added.
In addition, the latest EIA report showed that US stockpiles were 19.24 million barrels.
Elsewhere, Costain Group closed up 60% after the engineering services company said its Skanska Costain Strabag joint venture received a notice to proceed on the design and construction of HS2 rail project in the southern area. Its work will include digging tunnels for the approach of the railway line into London Euston station.
Costain said the contract is worth GBP3.30 billion to the joint venture as a whole, but it won't make a significant contribution to Costain's profit until financial year 2021 onwards. This is because construction is paused during the Covid-19 lockdown.
The UK government green-lighted approval for the HS2 project to begin the construction phase. UK Prime Minister Boris Johnson gave the green light for HS2 in February despite it running tens of billions of pounds over budget and several years behind schedule.
However, construction firms involved in phase one of the project will need to abide by social distancing rules.
The pound was quoted at USD1.2493 at the London equities close, down from USD1.2597 at the close Tuesday.
Sterling continued to show a sensitivity to global investor sentiment, rising when stocks appreciate and falling in times of heightened market anxiety.
"Sterling is back to neutral positioning after seeing most of its net long positions being curtailed as the pandemic started to hit the UK and Prime Minister Boris Johnson was hospitalised. The PM's improving health condition surely provided some short-term steam to GBP in the spot market but a re-build of those GBP longs will likely be challenged by fears of a longer-than-expected health crisis in the UK and the worsening economic impact," said analysts at ING.
The number of people who have tested positive for Covid-19 has now reached over 98,000, making the UK one of the worst affected countries in the global pandemic.
The UK government was under pressure to set out its plans to end the coronavirus lockdown, as the country's death toll approached 13,000.
Keir Starmer, the new leader of the Labour Party, said the opposition would support the government's expected decision on Thursday to renew a stay-at-home order imposed three weeks ago to stem the spread of the virus.
The euro stood at USD1.0903 at the European equities close, down from USD1.0962 late Tuesday.
Against the yen, the dollar was trading at JPY107.51, firm from JPY107.15 late Tuesday.
Stocks in New York were lower at the London equities close amid dire US retail sales figures and gloomy earnings from a triumvirate of major US banks due to the coronavirus pandemic.
The DJIA was down 2.8%, the S&P 500 index down 2.7% and the Nasdaq Composite down 1.9%.
On the corporate front, Bank of America said that a higher provision for Covid-19 related reserve build led to a 45% year-on-year drop in first-quarter net income.
The Charlotte, North Carolina-based lender recorded a net income of USD4.01 billion for the quarter ended March 31, down 45% from USD7.31 billion a year ago. Net income in the fourth quarter of 2019 amounted to USD8.17 billion.
Diluted earnings per share fell to USD0.40 from USD0.70 a year ago and USD0.74 in the previous quarter.
BofA attributed the drop in quarterly income to higher credit losses provision, driven by a USD3.6 billion reserve build for the Covid-19 pandemic. Credit loss provision for the quarter jumped to USD4.8 billion from USD1.00 billion a year ago.
The stock was down 5.9% on Wall Street.
Citigroup reported a sharp drop in quarterly profit, as the US banking giant built up its credit reserves to weather the Covid-19 pandemic.
In the three months to March 31, the investment bank and financial services firm recorded net income of USD2.52 billion, down 46% on the USD4.71 billion seen in the first quarter of 2019.
Citi upped its credit reserves to USD4.89 billion, compared to USD20 million a year before.
Diluted earnings per share were down to USD1.05 versus USD1.87 the year before.
The stock was down 3.9% in New York.
Goldman Sachs reported a sharp drop in quarterly profit as the bank's Asset Management unit struggled with the fallout from the Covid-19 pandemic.
In the three months to March 31, the US bank recorded pretax profit of USD1.35 billion, down 50% in the same period a year before.
The New York-headquartered firm took a USD937 million credit-loss provision in the first quarter compared to USD224 million in the first quarter last year.
Diluted earnings per share slipped 46% year on year to USD3.11.
The stock was down 1.2% on Wall Street.
US retail sales slumped in March, official data showed, with the Census Bureau noting many firms are operating in a "limited capacity" or have ceased operations completely due to Covid-19.
Month-on-month, retail sales fell 8.7% after a 0.4% fall in February. This was the biggest decline since the government started tracking the series in 1992, according to the Commerce Department.
Year-on-year, retail sales slumped 6.2% after a 4.6% rise the month before.
"With the lockdowns having spread across the country in recent weeks, we suspect that there will be more pain to come, compounded by the fact that millions of workers have lost their jobs and will automatically be constricting their spending. A such, April's retail sales report will likely show broader weakness," said analysts at ING.
In addition, US industrial production fell 5.4% in March as the coronavirus pandemic forced factories to close their doors and workers to stay home, the Federal Reserve said.
It was the largest decline since 1946, reflecting the economic devastation wrought by the disease, which has caused businesses to shed some 17 million jobs since mid-March as the pandemic curtailed consumer spending and paralyzed the world's largest economy.
Gold was quoted at USD1,720.22 an ounce at the London equities close against USD1,734.53 late Tuesday.
The economic events calendar on Thursday inflation readings from Germany at 0700 BST and US continuing jobless claims at 1330 BST.
The UK corporate calendar on Thursday has first-quarter earnings from pest control firm Rentokil Initial and a trading statement from personal care products maker PZ Cussons.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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