(Alliance News) - Stock prices in London opened firmly in the red on Monday as fears of a global economic meltdown from the coronavirus mounted, prompting company after company to stop shareholder returns and apply the brakes to spending.
The global death toll from the virus has surged past 14,700, with nearly a billion people confined and non-essential businesses shut in dozens of countries and growing fears about a recession.
The FTSE 100 index was down 228.06 points, or 4.3, at 4,962.72 early Monday.
The mid-cap FTSE 250 index was down 761.214 points, or 5.6%, at 12,831.43. The AIM All-Share index was down 3.3% at 602.99.
The Cboe UK 100 index was down 4.6% at 8,362.81. The Cboe 250 was down 4.2% at 11,209.75, and the Cboe Small Companies down 0.7% at 7,562.68.
On Sunday, a trillion-dollar Senate proposal to rescue the US economy crashed to defeat after receiving no support from Democrats, and with five Republicans absent from the chamber because of virus-related quarantines.
Democrats said the Republican plan failed to sufficiently protect millions of US workers or shore up the critically under-equipped health care system during the coronavirus crisis. The bill proposed an estimated USD1.7 trillion or more in funding to cushion the blow for American families and thousands of shuttered or suffering businesses.
Despite intense negotiations between Republicans, Democrats and President Donald Trump's administration, the roll call was 47-47, far short of the 60 votes needed to advance.
"Even if the reasons behind the Democrats' intransigence are sound, America's inability to move things forwards stands in contrast to many of its now free-spending peers, and has sent the market into another tailspin," said Spreadex analyst Connor Campbell.
In the FTSE 100, ITV was down 16% after the broadcaster said recent restrictions on working practices in the UK was hurting its ability to film productions, and it has had to pause a significant number of productions in the UK and internationally as a result.
Further, the broadcaster said measures implemented by the UK government - which has led to the closure of shops, factories and entertainment facilities - has hurt advertising revenue. As such, ITV said forecasts for March and April have "deteriorated" since its last update earlier this month.
"We have seen further deferrals in advertising which are now coming from across the advertiser categories rather than just in travel, and we are staying in close contact and working constructively with our client and agency partners. The situation remains dynamic and therefore we are not in a position today to give guidance for March or April," ITV said.
As a result of the uncertainty of Covid-19, ITV has withdrawn its market guidance for 2020. Further, the board has decided not to propose the final dividend of 5.4 pence per share for 2019 at the forthcoming AGM in April.
ITV said savings from this will ensure that more than GBP300 million of cash will be retained within the business.
Pearson was down 11% after the education publisher said it has suspended its share buyback programme in light of the ongoing uncertainty caused by the coronavirus outbreak.
The company noted that GBP167 million of the GBP350 million buyback was completed before the suspension.
"We have already identified actions to reduce operating expenditure and discretionary spend to partially mitigate the potential impact from Covid-19, and we are actively exploring further efficiencies. We are also exploring whether we qualify for governmental relief in key territories, as a result of the closure of schools and testing centres," Pearson said.
Pearson said uncertainty from Covid-19 has meant its Pearson VUE, US Student Assessments and Higher Education institutions in South Africa - which rely on physical sites - will take a hit. However, it is seeing a significant increase in the use of its digital products and services. Pearson added that trading to the end of February was in line with expectations.
Royal Dutch Shell 'A' and Shell 'B' shares were down 2.9% and 3.1% respectively after the oil major said it would suspend its own share buyback programme and take "decisive action" to ensure it is well-positioned for an economic recovery.
Shell said it would axe operating costs by USD3.0 billion to USD4.0 billion over the next 12 months. As oil majors struggle with a collapse in oil prices and reduced demand, Shell said it will cut annual spending to a maximum of USD20 billion dollars for 2020 from its previous expectations of USD25 billion.
Further, Shell said it has decided not to continue with the next tranche of the share buyback programme following the completion of the current share buyback tranche.
Shell is London's largest listed company by market capitalisation and is under threat from a collapse in oil prices due to its high breakeven oil price.
Brent oil was trading at USD25.52 a barrel Monday morning, down sharply from USD27.31 late Friday.
Hargreaves Lansdown analyst Nick Hyett said: "We're not surprised Shell has opted to slash costs and capital spending - it's very much in line with the 2015-16 playbook and reflects a desire to protect cash and ultimately the dividend. If the current oil price decline proves temporary then Shell will be rewarded for sticking to its totemic dividend policy.
"However some shareholder returns have already proven less than sacrosanct, with the share buyback suspended. If we're in a new era of sustained sub-USD40 oil then the dividend could yet become a burden that's too much to bare."
The Shanghai Composite ended down 2.9% on Monday, while the Hang Seng index in Hong Kong closed down 4.9%.
The Japanese Nikkei 225 index closed up 2.0%. Financial markets in Japan reopened on Monday after being closed for a holiday on Friday.
Against the yen, the dollar was quoted at USD109.70 on Monday, down from JPY111.33 on Friday.
Japanese Prime Minister Shinzo Abe said Monday that Japan must consider postponing this summer's Tokyo Olympics if the novel coronavirus crisis deepens.
The pound was quoted at USD1.1630 on Monday morning, lower than USD1.1745 at the London close Friday, as fears of a UK lockdown to contain the spread of the coronavirus mount.
Over the weekend, UK Prime Minister Boris Johnson said he will be thinking "very, very actively" about what steps to take if people continue to gather in large numbers in defiance of calls to stay apart.
The euro was quoted at USD1.0756, up from USD1.0700.
Gold was quoted at USD1,487.40, flat from USD1,488.90.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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