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(Alliance News) - Stocks in London are set to open sharply lower on Wednesday as market whiplash over the new coronavirus outbreak continues, with the previous session's more upbeat mood fading overnight in Asia.
A fresh wave of companies in London warned of significant disruption from Covid-19, including hospitality firms Restaurant Group, Marston's and Mitchells & Butlers. Meanwhile, Wm Morrison Supermarkets recorded a rise in profit for its recently ended financial year.
IG says futures indicate the FTSE 100 index of large-caps to open 246.00 points lower at 5,048.90 on Wednesday. The FTSE 100 index closed up 143.82 points, or 2.8%, at 5,294.90 on Tuesday.
"European and US equity markets underwent a turbulent session yesterday, eventually finishing the day on the up, as politicians queued up one behind the other throughout the day to announce a series of ambitious fiscal stimulus measures, in an attempt to head off what is likely to turn into a deep recession and possible financial crisis, for millions of people," said Michael Hewson at CMC Markets.
US President Donald Trump said the White House was discussing a "substantial" spending bill with Congress that would include immediate cash payments to Americans. The Financial Times reported this could be as large as USD850 billion.
"We're going big," Trump told reporters.
UK Chancellor Rishi Sunak unveiled an "unprecedented package" of government-backed loans worth GBP330 billion for businesses struggling in the sudden economic paralysis caused by mass self-quarantine.
France has pledged a EUR45 billion aid package and German Chancellor Angela Merkel confirmed a 30-day "entry ban" into the EU. The World Health Organization urged the "boldest actions" on the continent, the pandemic's latest epicentre.
Asian hotspots China and South Korea have seen new infections and deaths level out in recent weeks – China reported just one new domestic case for the second consecutive day on Wednesday – but numbers are ballooning across Europe.
"In Asia the gains in the US and Europe are struggling to stick, while the Australian market has plunged sharply, with the consequence that US futures have rolled over again and are currently 5% limit down," said Hewson. "Markets here in Europe don't look much better and look set to open sharply lower as fretful investors look to find an equilibrium and decide whether yesterday's measures are likely to be enough."
There were a fresh raft of Covid-19 warnings in London early Wednesday.
Restaurant Group said it has seen a sharp slowdown in sales, with its Concessions business "getting worse by the day" due to international travel bans.
For the first eight weeks of the financial year, like-for-like sales were up 4.5%. In the last two weeks, however, sales have tumbled 13%. In the Concessions business, which operates outlets in places such as airports, sales have been down 22% and the situation is "getting worse by the day".
The company, which operates casual dining chains such as Frankie & Benny's and Wagamama, is now assuming an overall decline in like-for-like sales of 25% in the current financial year, with a "significant" fall in its Concessions business.
It expects adjusted earnings before interest, tax, depreciation and amortisation between GBP95 million and GBP105 million for the financial year ended December 27.
"Clearly the situation is evolving rapidly and there is no certainty around the severity and duration of the impact on the business. The company is continuing to consider its funding options, both equity and debt, on an ongoing basis," said Restaurant Group.
Outside the UK, French food services and facilities management company Sodexo said Wednesday it expects the coronavirus pandemic to hit its annual revenue by EUR2 billion. Sodexo said the Covid-19 pandemic started to be a concern in the second half of January for its business in China, leading to a "rapid deterioration" worldwide in February.
Back in London, Mitchells & Butlers said recent trading has been "severely impacted" by Covid-19.
"Given the rapidly evolving nature of the situation it is impossible to quantify the impact Covid-19 could have on our financial performance. However, we expect a significant reduction in our expected outturn for 2020 and, given this uncertainty, can no longer provide detailed guidance on the expected forward financial performance for the year," the pub operator said.
The company stressed it has a "strong" balance sheet and has sufficient headroom.
Peer Marston's said it expects UK government advice for people to avoid pubs and bars will dent sales in the coming weeks.
Like-for-like sales in its pubs for the 24 weeks to March 14 were 1% below last year. Marston's said it is unable to quantify the hit from Covid-19 at this stage, though it anticipates a reduction in its expectations for the current financial year.
"Recent statements from the UK government suggest that the current state of much reduced social activity is likely to continue for several months at least. If that is the case, it is unlikely that an interim dividend will be recommended in May, retaining c.GBP20 million in the business," the company commented.
Clothing retailer Superdry said it is seeing "major disruption".
As trading has been "significantly impacted" by Covid-19, with the firm temporarily closing stores in a number of countries, it has become "clear" that the company will not meet guidance. As such, Superdry has withdrawn its guidance for the 2020 financial year.
"Given the performance to date, we do not expect the decline in sales from our retail stores to be fully mitigated by sales through our e-commerce channel, which remains fully open for business. Whilst we are also pursuing cost-saving measures across the business, we do not expect these to be sufficient to offset the sales decline," said Superdry.
The retailer said it has GBP47 million of net cash, and its working capital performance to date has been "better" than forecast.
Outside of Covid-19 updates, Wm Morrison Supermarkets reported a rise in profit for its recently-ended financial year.
Total revenue for the year to February 2 was down 1.1% to GBP17.5 billion, though pretax profit jumped 44% to GBP435 million. Profit was boosted as Morrisons booked a GBP27 million exceptional gain, versus a loss of GBP93 million the year before.
Profit before tax and exceptional items was up 3.0% to GBP408 million.
Like-for-like sales were down 0.8%, having risen 4.8% the year before.
Sales have been on an "improving trend" since the start of 2020, the supermarket said.
"During the last two weeks, there has been considerable stocking up and sales pull-forward as customers plan for the impact of Covid-19. Overall, for the first six weeks of 2020-21, retail contribution to LFL was 5.0%," said Morrisons.
Elsewhere in the grocery sector, Tesco and J Sainsbury noted the UK government's plan to give all retail businesses a full business rates holiday for the next twelve months.
Both said they are awaiting further details on the policy, though Sainsbury's highlighted that it paid GBP567 million in business rates for the financial year ended March 2019, of which GBP500 million related to stores.
Sterling was quoted at USD1.2099 early Wednesday, higher than USD1.2057 at the London equities close on Tuesday.
The euro traded at USD1.1018 early Wednesday, higher than USD1.0974 late Tuesday. Against the yen, the dollar was quoted at JPY106.91 versus JPY107.44.
In the US on Tuesday, Wall Street ended in the green, with the Dow Jones Industrial Average ending up 5.2%, the S&P 500 up 6.0% and the Nasdaq Composite up 6.2%.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 1.7%. In China, the Shanghai Composite closed down 1.8%, while the Hang Seng index in Hong Kong is down 4.5%. In Sydney, the S&P/ASX200 slumped 6.4%.
In economic data released Wednesday, Japan's imports from China almost halved last month from a year earlier to log the steepest fall since 1986 as the new coronavirus outbreak disrupted trade.
February imports from China, Japan's biggest trade partner along with the US, plunged 47% to JPY673.4 billion, about USD6.3 billion, while exports slipped 0.4% to JPY1.14 trillion.
Gold was quoted at USD1,510.30 an ounce early Wednesday, lower than USD1,527.67 on Tuesday. Brent oil was trading at USD28.32 a barrel, down from USD29.72.
"Oil missed its chance to hitch a ride higher with equities overnight. Both Brent crude and WTI continued wilting as the ongoing producer price war, and the exponential increase in countries closing borders, crushed any rebound hopes," said Jeffery Halley, senior market analyst at Oanda.
In the economic calendar for Wednesday, there is eurozone inflation at 1000 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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