London close: Stocks finish weaker as banks remain red

(Sharecast News) - London stocks remained in the red by the close on Wednesday, after the release of weak UK manufacturing figures, and with banking plays under pressure as they were pressed to cancel their dividends to help weather the coronavirus pandemic.
The FTSE 100 ended the session down 3.83% at 5,454.57 and the FTSE 250 was 3.67% weaker at 14,547.20.

Sterling was mixed against its two major trading pairs, last weakening 0.2% against the dollar to $1.2395, but strengthening 0.69% on the euro to €1.1332.

The fall came after data showed that UK manufacturing output fell in March at its fastest rate in eight years, while employment declined at the fastest rate in more than a decade, as the Covid-19 coronavirus pandemic outbreak and efforts to slow its spread took their toll.

The IHS/Markit CIPS manufacturing purchasing managers' index came in at 47.8, down from 51.7 in February, which was below the flash estimate of 48.0 but above consensus expectations for a reading of 47.0.

That marked the fastest rate of decline since July 2012, and was below the 50 point level which separates expansion from contraction.

Meanwhile, employment fell for the 11th time in the past 12 months and at the fastest rate since July 2009.

Job losses were linked to lower levels of production and new orders, in many cases due to the outbreak of Covid-19.

"The manufacturing sector was knocked sideways by the impact of Covid-19 and into contraction territory, experiencing some of the most challenging trading conditions since PMI records began," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

"Closed borders, significant shipping delays and a reluctance from clients to authorise new instructions resulted in the sharpest contraction in orders from domestic and overseas markets since 2012.

"Business optimism dropped to historical lows as manufacturers struggled to get essential raw materials, whilst some fortunate few were able to stockpile to a limited extent before the opportunities vanished."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the PMI likely "greatly understates" the pace of the downturn now underway in the manufacturing sector."

The escalating coronavirus pandemic also weighed on sentiment, with Nigel Frith, senior market analyst at AskTraders, saying US President Donald Trump's prediction that up to 240,000 Americans could lose their lives as a result of the virus "sent a chill down the spine of the markets".

"These numbers are truly horrifying," he added.

On the UK corporate front, banks were under the cosh, with Barclays down 11.95%, Royal Bank of Scotland off 5.23%, Lloyds Banking Group losing 10.23%, HSBC 7.52% weaker and Standard Chartered falling 7.27%, as they suspended dividend payments due to the outbreak.

In response to a request from the Prudential Regulation Authority, the banks agreed to scrap 2020 interim dividend payments, cancel their payments for 2019 and not undertake any share buybacks on ordinary shares until the end of the year.

Shore Capital said that by taking that action, the banks could save between 50 and 150 basis points in core tier 1 capital over the course of the year, which could then be used to support lending into the economy.

"In addition, we believe that this action reduces the risk of potential future dilutive equity issuance to recapitalise balance sheets as a result of any losses generated due to higher impairments, while also helping to support tangible net asset values," Shore Capital said.

"We think that the UK banks entered this crisis well positioned to weather the storm with well-capitalised, well-funded and liquid balance sheets.

"The actions taken to suspend dividends and share buy-backs further strengthen their position."

Elsewhere, Taylor Wimpey was in the red by 6.38% after it said executives at the housebuilder had agreed to cancel bonuses and take a 30% base salary for the duration of the coronavirus lockdown.

Defence company Qinetiq fell 2.3% after saying it will postpone a decision on whether to pay a final full-year dividend until later in the year, when there is greater clarity on the impact of the coronavirus pandemic.

Auto Trader retreated 11.05% as it announced a share placing equal to 5% of its share capital and reductions to directors' pay to strengthen its finances during the Covid-19 crisis.

Real estate agent Savills was down 9.76% after saying it was pulling its final and supplemental interim dividends to save cash in response to the coronavirus pandemic.

Market Movers

FTSE 100 (UKX) 5,454.57 -3.83%
FTSE 250 (MCX) 14,547.20 -3.67%
techMARK (TASX) 3,234.97 -2.76%

FTSE 100 - Risers

Ocado Group (OCDO) 1,329.50p 8.98%
British American Tobacco (BATS) 2,856.50p 3.53%
Imperial Brands (IMB) 1,530.00p 2.22%
Morrison (Wm) Supermarkets (MRW) 180.50p 1.40%
Sainsbury (J) (SBRY) 213.10p 1.28%
Hikma Pharmaceuticals (HIK) 2,058.00p 1.13%
Admiral Group (ADM) 2,247.00p 0.76%
Royal Dutch Shell 'A' (RDSA) 1,421.20p 0.16%
Reckitt Benckiser Group (RB.) 6,076.00p -0.49%
Royal Dutch Shell 'B' (RDSB) 1,352.40p -0.54%

FTSE 100 - Fallers

Carnival (CCL) 779.00p -20.62%
Meggitt (MGGT) 245.60p -15.40%
Melrose Industries (MRO) 78.00p -14.75%
Barclays (BARC) 82.86p -11.95%
Lloyds Banking Group (LLOY) 28.27p -11.66%
Legal & General Group (LGEN) 171.55p -11.50%
Auto Trader Group (AUTO) 390.60p -11.05%
Persimmon (PSN) 1,708.00p -10.88%
WPP (WPP) 493.30p -10.54%
Rolls-Royce Holdings (RR.) 305.00p -10.45%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 104.90p 64.78%
Apax Global Alpha Limited (APAX) 121.80p 7.02%
Fisher (James) & Sons (FSJ) 1,328.00p 5.56%
Avon Rubber (AVON) 2,405.00p 4.34%
Pantheon International (PIN) 1,740.00p 3.57%
Drax Group (DRX) 158.90p 3.38%
Primary Health Properties (PHP) 165.60p 3.11%
PPHE Hotel Group Ltd (PPH) 1,005.00p 3.08%
CLS Holdings (CLI) 195.80p 3.02%
Morgan Advanced Materials (MGAM) 190.40p 2.86%

FTSE 250 - Fallers

OneSavings Bank (OSB) 204.80p -18.34%
Cineworld Group (CINE) 40.87p -17.65%
Provident Financial (PFG) 185.00p -14.79%
Future (FUTR) 866.00p -13.40%
UK Commercial Property Reit Limited (UKCM) 65.00p -13.33%
Paragon Banking Group (PAG) 289.80p -12.82%
Capita (CPI) 28.58p -12.63%
Virgin Money UK (VMUK) 54.22p -12.55%
Airtel Africa (AAF) 36.10p -12.21%
Polypipe Group (PLP) 404.50p -12.07%