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(Alliance News) - London stocks got off to a cautious start on Thursday ahead of a purchasing managers' index reading later in the morning, with traders eyeing the blow Covid-19 will have dealt the UK's service sector.
Dragging down London's blue-chip index were Unilever and Legal & General, while Taylor Wimpey and Meggitt were the top performers.
The FTSE 100 index was down 20.11 points, or 0.4%, at 5,750.52 early Thursday. The mid-cap FTSE 250 index was up 78.30 points, or 0.5%, at 15,664.44. The AIM All-Share index was up 0.2% at 767.42.
The Cboe UK 100 index was down 0.3% at 9,729.79. The Cboe 250 was up 0.8% at 13,488.41, and the Cboe Small Companies up 0.2% at 8,753.23.
Taylor Wimpey was at the top of the FTSE 100, up 6.1% as it said it will start to remobilise construction the week beginning May 4.
The housebuilder's order book has continued to increase and for the week to April 19 its total value stood at GBP2.68 billion versus GBP2.40 billion a year ago.
Meggitt was up 5.9% as it said trading in the first quarter was ahead of a year ago, but in the past few weeks it has started to see a "softening" in its civil aerospace business.
Revenue was up 5% on an organic basis in the first quarter, with strong growth in defence more than offsetting a weaker performance in civil aerospace and energy.
To mitigate any weakening in demand due to Covid-19, Meggitt has reduced variable costs and has cut the size of its workforce by 15%. It will freeze all new hiring, cut operation costs and remove annual salary increases.
The implementation of these measures will reduce cash expenditure levels by around GBP400 million to GBP450 million in 2020.
Looking ahead, Meggitt said it is "too early" to give forward guidance.
Towards the other end of the index was Unilever, down 5.6%. The consumer goods firm said underlying sales growth was flat in the first quarter as it withdrew its guidance due to Covid-19.
The Marmite maker reported no underlying sales growth in the first three months of 2020, with volumes up 0.2% but prices down 0.2%. Developed markets underlying sales growth was 2.8% but emerging markets sales declined 1.8%.
On a reported basis, quarterly turnover was up 0.2% to EUR12.44 billion.
Unilever said Covid-19 has led to "extensive changes" in the operating environment in its markets.
Most major markets, outside China, saw normal sales patterns in January and February with Covid-19 hitting in March. Lockdowns have seen little out-of-home consumption of ice cream and food, the firm said, but initial household stocking of both hygiene and food products led to increased volume in some markets.
"We will continue to adapt throughout this crisis. However, the unknown severity and duration of the pandemic, as well as the containment measures that may be adopted in each country, mean that we cannot reliably assess the impact across our markets and our business. We are therefore withdrawing our previous growth and margin outlook for 2020," said Chief Executive Alan Jope.
At the bottom of the FTSE 100 was Legal & General, down 6.7%, as the insurance stock went ex-dividend.
In the FTSE 250, Computacenter was up 4.7% as it reported a "pleasing" first quarter given current conditions, adding that its full-year expectations remain unchanged.
First-quarter revenue was down slightly on a year ago, but profitability remained in line.
"Current trading has been more robust than we anticipated at the start of this crisis. There has been a marked difference in need from customer to customer dependent upon which sector their business is in. There has been a surge in demand from many of our customers to enable business continuity particularly around homeworking and network resilience," the IT services firm said.
In order to preserve cash, Computacenter will no longer propose a final dividend at its annual general meeting.
"Given the factors on the business, mentioned above, we are confident in the short-term outlook and the board believes that the pre-tax profit performance in the first half of 2020 will be broadly in-line with, or slightly ahead of, that of the first half of 2019. The second half of the year is more difficult to predict but currently our full year expectations remain unchanged," Computacenter said.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite is down 0.2%, while the Hang Seng index in Hong Kong is up 0.3% in late trade.
Released overnight, the Japanese service and manufacturing sectors slumped sharply in April as the Covid-19 pandemic "crippled the economy", the flash au Jibun-IHS Markit purchasing managers' index showed.
The flash composite output index - a weighted average of the service and manufacturing readings - dropped to 27.8 in April from 36.2 in March.
Any reading below the no-change mark of 50 indicates a contraction of the sector, and one above expansion.
"PMI data for Japan tell us that the crippling economic impact from the global coronavirus pandemic intensified in April," IHS Markit Economist Joe Hayes said.
Against the yen, the dollar was quoted at JPY107.80, flat versus JPY107.81.
To come are PMI readings from the eurozone and the UK at 0900 BST and 0930 BST respectively. There are US initial jobless claims at 1330 BST and a PMI reading at 1445 BST.
"Sentiment clearly remains fragile and that could be magnified with the release of the PMI readings for the UK and Eurozone. The service sector accounts for 80% of UK economic activity. In March the UK service sector contracted at the fastest pace on record, dropping to 34.5 on the index. And that was only the beginning of lock down! This months' reading is expected to dive deeper into contraction territory to 29," said Fiona Cincotta at City Index.
Already out, Germany's flash services PMI for April came in at 15.9 points, well down from the already depressed level of 31.7 in March. The manufacturing PMI reading was only slightly better at 34.4, down from 45.4 in March. All the readings indicate contraction.
Sterling was quoted at USD1.2312 early Thursday ahead of the data, soft against USD1.2323 at the London equities close on Wednesday.
The euro traded at USD1.0787 early Thursday, down on USD1.0829 late Wednesday.
In mainland Europe, the CAC 40 in Paris was up 0.9% while the DAX 30 in Frankfurt was 0.3% higher early Thursday.
Brent oil was trading at USD21.32 a barrel early Thursday, up from USD20.44 late Wednesday - having dipped as low as USD15.97 this week, its worst level since 1999.
"After every extensive sell-off, there is a relief rally and this is exactly what we are experiencing in oil prices. The front end (June) contracts for Crude and Brent have rallied and the oil prices are trying to win the investor community's confidence back. However, it will take a very long time for that to happen, especially after the massive damage that the negative prices have done," said Naeem Aslam, AvaTrade's chief market analyst.
Gold was quoted at USD1,712.13 an ounce early Thursday, higher than USD1,708.20 on Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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