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(Alliance News) - Stocks in London are set to open lower on Wednesday following lacklustre trade in Asia and a slump in New York overnight, after a US infectious disease expert warned against a premature re-opening of the world's largest economy.
In the UK, the economy contracted 5.8% in March from February, as Covid-19 and the resulting government-imposed lockdown sapped activity, official figures showed.
In early UK company news, Taylor Wimpey said it has continued to sell houses during the UK's lockdown, Spirax-Sarco confirmed it will pay its 2019 final dividend, and Aston Martin's quarterly loss widened, with the luxury sports car maker withdrawing its guidance for the year due to Covid-19.
IG says futures indicate the FTSE 100 index of large-caps to open 55.67 points lower at 5,939.10 on Wednesday, entirely reversing the previous day's gain. The FTSE 100 index closed up 55.04 points, or 0.9%, at 5,994.77 on Tuesday.
In Asia on Wednesday, the Japanese Nikkei 225 index ended down 0.5%. In China, the Shanghai Composite is up 0.3%, while the Hang Seng index in Hong Kong is up 0.2%.
"Asian stocks are following their US peers lower after warnings against a premature re-opening of the economy," commented Stephen Innes, chief global markets strategist at AxiCorp.
In the US on Tuesday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 1.9% and the S&P 500 and Nasdaq Composite both 2.1% lower.
Anthony Fauci, the top infectious disease expert in the US, warned bluntly of "really serious" consequences of suffering, death and deeper economic damage if state and local officials lift stay-at-home orders too quickly, even as President Donald Trump pushes them to act to right a free-falling economy.
The US recorded 1,894 more coronavirus deaths, bringing the total to 82,246, according to a Johns Hopkins University tally on Tuesday.
Fauci's evidence before a Senate committee came as more than two dozen states have begun to lift their lockdowns as a first step toward economic recovery.
Meanwhile, US Democrats on Tuesday unveiled a USD3 trillion coronavirus response package, the largest yet, to fund state and local efforts to fight the pandemic and provide emergency payments to millions.
The Heroes Act was introduced in the House of Representatives and could be voted on in the Democratic-led chamber as early as this week. But the measure will face immediate opposition from the White House and in the Senate, as President Donald Trump and the Senate's Republican leadership have said a new round of emergency funding is not yet needed.
In England, people will now be allowed to spend more time outside, meet a friend at the park and view a potential new home as the government begins to relax coronavirus lockdown measures.
Changes in the guidelines, which come into force from Wednesday, have caused confusion and anger – as people remain unable to visit relatives or friends at their homes, but can now be shown around a property for sale.
The move to unlock the housing market will enable buyers and renters to complete purchases and view properties in person, while visiting estate agents, developer sales offices or show homes will also be allowed.
In the economic calendar on Wednesday, there is eurozone industrial production at 1000 BST and US producer prices are at 1330 BST.
Already released, official data showed the UK economy shrank in the first three months of the year, led by a sharp fall in March.
UK gross domestic product fell 2.0% sequentially in the first quarter after a flat reading for the fourth quarter of 2019. Annually, first quarter GDP fell by 1.6%.
Though dire, the latest figures were better than expected by the market. Consensus, according to FXStreet, had seen a quarter-on-quarter decline of 2.5% and an annual fall of 2.1%.
In the month of March alone, the economy shrank by 5.8% month-on-month, having fallen 0.2% in February and advanced 0.1% in January.
Sterling edged up to USD1.2296 after the data, but remained lower than USD1.2310 at the London equities close on Tuesday.
The euro traded at USD1.0853 early Wednesday, lower than USD1.0870 late Tuesday. Against the yen, the dollar was quoted at JPY107.15 versus JPY107.28.
Gold was quoted at USD1,704.11 an ounce early Wednesday, soft on USD1,707.15 on late Tuesday in London. Brent oil was trading at USD29.51 a barrel, down from USD29.80.
In early UK company news, Taylor Wimpey said its sales rates have remained stable since its last update.
During the UK lockdown period, the housebuilder has sold 408 homes net of cancellations, averaging a net private sales rate of 0.30 homes per outlet per week. It will be reopening sales offices and show homes from May 22 for pre-booked appointments.
It expects to recall the majority of its sales staff from furlough by May 18 and most other staff by the end of the month.
Spirax-Sarco Engineering said trading has "held up well" despite the unprecedented backdrop, though it thinks the worst of the Covid-19 downturn will be seen in the second and third quarters.
Demand from MRO - Maintenance, Repair and Overhaul - and small improvement project activities, which traditionally make up around 85% of revenue, experienced only a mild decline in the four months to April 30 compared to a very strong comparable period in 2019.
In the Steam Specialties business, sales in the four months were down 7% organically, with the majority of the shortfall coming from Asia Pacific. In the Electric Thermal Solutions business, sales were up 16% at constant currency, and Watson-Marlow's sales grew 4% organically in the period.
On an organic and reported basis, operating profit was behind the comparable four-month period in 2019, although operating margins remained above 21% due to cost containment actions.
"While trading in the first four months of the year has held up well, we currently believe the worst of the downturn will occur in the second and third quarters of 2020. Absent a resurgence of the Covid-19 pandemic in the second half of the year, we currently expect trading conditions to improve in the last quarter of 2020, resulting in a lower contraction of organic sales in the second half of 2020 than in the first half," said Spirax-Sarco.
It confirmed the payment of its 2019 final dividend will be made on May 22.
Plumbing and heating supplies firm Ferguson said strong momentum in February and March was brought to a halt in April due to Covid-19.
Third-quarter revenue growth, from continuing operations, was 0.9%. This was due to combined growth of 7.3% in February and March, partially offset by a 11% slump in April.
"We have taken steps to manage our cost base and protect cash flow given the uncertain outlook both in the short-term during the crisis phase but also to ensure the business is appropriately sized for the post Covid-19 environment. We are confident these actions coupled with the strength of our balance sheet will serve us well in the coming months and years," said Chief Executive Kevin Murphy.
Aston Martin Lagonda Global Holdings saw its quarterly loss widen as revenue slumped.
Andy Palmer, president & CEO, said Covid-19 and the resulting global economic shutdown had a "material impact" on the auto maker's performance in the quarter.
First-quarter wholesale volumes were down 45% year-on-year to 578 with revenue down 60% to GBP78.6 million. The luxury car maker's pretax loss widened to GBP118.9 million from GBP17.3 million.
The uncertainty surrounding the duration and impact of the Covid-19 pandemic makes it "not possible to provide a clear view on the full year outlook", the company said, and as a result Aston Martin has withdrawn its guidance for the year
"The company is proceeding on the assumption that trading remains challenging and is therefore implementing measures to take further actions on operating costs and focus on controlling cash," Aston Martin added.
By Lucy Heming; lucyheming@alliancenews.com
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