LONDON MARKET CLOSE: FTSE 100 Claws Back Losses As US Markets Rally

Wed, 26th Feb 2020 17:03

(Alliance News) - The FTSE 100 managed to end higher on Wednesday recovering from sharp losses earlier in the session after US equity markets rebounded.

The death toll from the coronavirus is now at more than 2,700, while the total number of infected has surpassed 80,000, even if the number of new cases in China are falling.

The FTSE 100 index closed up 24.59 points, or 0.4%, at 7,042.47. The large cap index fell to an intraday low of 6,871.85 in early trade - slipping below the 7,000 mark for the first time in over a year.

The FTSE 250 ended down 93.02 points, or 0.5%, at 20,622.95, and the AIM All-Share closed down 18.66 points, or 2.0%, at 911.16.

The Cboe UK 100 ended up 0.3% at 11,925.58, the Cboe UK 250 closed down 0.7% at 18,563.43, and the Cboe Small Companies ended down 1.8% at 12,082.79.

In Paris the CAC 40 ended up 0.1%, while the DAX 30 in Frankfurt ended down 0.1%.

"Equity markets are largely mixed as the sentiment has turned around somewhat. Earlier in the session, the markets were firmly in the red but then they started a come-back, and it looks as if some of the equity benchmarks are going to finish higher this afternoon. The health crisis is getting worse, but markets don't move in straight lines, so at some point there was going to be a switch in sentiment, and that's what we are seeing today," said CMC Markets analyst David Madden.

In the FTSE 100, NMC Health ended the best performer, up 6.6% after billionaire investor Richard Chandler's Clermont Trust raised its stake in the embattled private hospital group.

Singapore-based Clermont Trust, which invests in healthcare, finance and technology assets, now holds 6.6 million shares, or a 3.18% stake in NMC, having previously held 2.2 million shares last week.

However, NMC remains at risk of demotion from the FTSE 100 - with its market value currently standing at GBP1.5 billion - when FTSE Russell announces the results of its latest index review changes next week.

At the other end of the large cap index, Taylor Wimpey ended the worst performer, down 3.0%, after the housebuilder warned its margins would be squeezed in 2020.

Taylor Wimpey posted a full-year revenue climb with completions rising to a company record. Revenue in 2019 came in 6.4% higher at GBP4.34 billion from GBP4.08 billion, with the firm's pretax profit rising 3.1% to GBP835.9 million from GBP810.7 million.

Before exceptional items however, pretax profit dipped 4.1% to GBP821.6 million from GBP856.8 million. In 2019, the company made a GBP14.3 million gain from such one-off items, swinging from a GBP46.1 million loss.

Operating profit in 2019 was GBP850.5, down from GBP880.2 million in 2018, with an operating profit margin of 19.6%, down from 21.6% in 2018.

Looking ahead, Taylor Wimpey said it expects volumes for 2020 and its operating profit margin in the first half of 2020 will show pressure from 2019 build cost inflation and selling prices as well as long term investment in quality and business improvement.

"Build costs are increasing and asking prices are stalling, and this is inevitably having an impact on levels of profitability. Though Taylor Wimpey doesn't appear to be willing to give up 20%-plus margins without a fight," commented AJ Bell's Russ Mould.

Peers Barratt Developments, Persimmon and Berkeley Group closed down 2.5%, 0.3% and 2.0% respectively in a negative read-across.

Diageo closed down 0.9% after the distiller became the latest high-profile firm to warn over the effects of the coronavirus on its earnings.

The Johnnie Walker whisky maker expects a negative impact on organic net sales for its year ending June in the range of GBP225 million to GBP325 million. Diageo guided for organic operating profit to be knocked in the range of GBP140 million to GBP200 million. Diageo said the final impact will be determined by timing and the pace of recovery in China as well as several other Asian countries such as South Korea, Japan, and Thailand.

Diageo said these estimates exclude any impact of coronavirus on other markets, with Diageo saying it is "difficult" to predict how coronavirus will spread.

In the FTSE 250, Weir Group ended the best performer, up 11%, after the engineer said it was looking to exit its oil and gas business as it reported a sharp swing to an annual loss due to a non-cash impairment from the Oil & Gas North American assets.

For 2019, the firm posted a reported pretax loss of GBP372 million, compared to a profit of GBP86 million the year before, due to an impairment charge of GBP546 million recognised in the Oil & Gas North American cash generating unit. Weir said challenging market conditions and uncertainty about the timing of market recovery led to estimates of future cash flows featuring lower revenue and margin assumptions, leading to a review of specific assets considered to be at risk.

The Glasgow-based company declared a final dividend of 30.45 pence per share, bringing the total payout to 46.95p, up 2% from 46.20p the prior year.

Weir said its focus going forward was to become a "pure play" mining technology firm and added it was "looking for opportunities to maximise value from the oil and gas business at the right time".

At the other end of the midcaps, Restaurant Group ended the worst performer, down 7.2%, after the Frankie & Benny's, Chiquito and Wagamama dining chains owner suspended payouts to allow a new strategy to be implemented, which will include reducing debt and shutting sites.

Restaurant Group paid a dividend of 8.27 pence per share for 2018, but said there will be no final dividend for 2019. At the half-way stage of 2019, it paid a dividend of 2.1p, well below the interim dividend of 6.8p in 2018.

The dividend has been halted as London-based Restaurant Group embarks on a plan to grow Wagamama, as well as its Concessions and Pubs businesses. It will also begin closing sites in the Leisure unit, targeting between 260 to 275 sites by the end of 2021, with 350 currently open.

The pound was quoted at USD1.2920 at the London equities close, down from USD1.3009 at the close Tuesday.

The euro stood at USD1.0866 at the European equities close, lower than USD1.0879 late Tuesday.

Against the yen, the dollar was trading at JPY110.52, higher than JPY110.12 late Tuesday.

US equities markets were sharply higher at the London equities close, as investors looked to pick up stocks at reduced prices following four successive days of losses.

The DJIA was up 1.6%, the S&P 500 index up 1.5% and the Nasdaq Composite up 2.0%.

"The Dow Jones rode in like something of a white knight on Wednesday afternoon, rescuing Europe from its intraday lows. The Dow added 350 points after the bell, a rebound likely born of nothing more than bargain-hunting investors sweeping in at near-4 month lows," commented Spreadex analyst Connor Campbell.

The stock market rally came as US health officials warned the epidemic was likely to hit the world's biggest economy.

With cases being reported in more countries - and lockdowns in nations including Austria, Italy and Spain - investors are growing increasingly fearful about the impact on the global economy.

Democrats have pointed to a White House request to Congress for deep cuts to the budgets of science and health agencies such as the National Institutes of Health.

On Monday, the White House sent a request to Congress to make at least USD2.5 billion in funding available for preparedness and response, including developing treatments and vaccines and buying equipment for a strategic national stockpile.

US President Donald Trump announced he would hold a news conference from the White House addressing the coronavirus epidemic later on Wednesday.

Brent oil was quoted at USD54.45 a barrel at the London equities close, down from USD55.50 at the close Tuesday. The North Sea benchmark fell to an intraday low of USD53.60 in afternoon trade - its lowest level in 13 months, amid coronavirus fears.

"Shutdowns in Italy highlight the potential for the Wuhan experiences to be replicated globally, with crude demand likely to plummet if mobility becomes restricted throughout other parts of the world. With oil supply already expected to outstrip demand in 2020, any further spread of this virus will be expected to drag crude prices lower," said IG Group.

Gold was quoted at USD1,637.00 an ounce at the London equities close, down from USD1,646.81 late Tuesday.

The economic events calendar on Thursday has Spain inflation readings at 0800 GMT and US Personal Consumption Expenditures data at 1330 GMT.

The UK corporate calendar on Thursday has annual results from Asia-focused bank Standard Chartered, ad agency WPP, housebuilder Persimmon, pest control firm Rentokil Initial, tobacco firm British American Tobacco, wealth manager St James's Place, insurer RSA Insurance Group and from Valkyrie hypercar maker Aston Martin Lagonda.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com