LONDON MARKET CLOSE: FTSE 100 Suffers Worst Week Since Financial Crash

(Alliance News) - Stocks in London ended sharply lower on Friday as global equities drastically succumbed to the spread of the coronavirus, in a week which saw many high-profile companies warn over the epidemic's impact on earnings.

The number of new coronavirus cases in the world rose to 83,853, including 2,873 deaths, across 56 countries and territories, according to data from official sources.

Outside of China, the virus is spreading at a faster pace. Nigeria on Friday announced the first confirmed case of the novel coronavirus in sub-Saharan Africa. In the US, a patient contracted the virus with no clue as to where it came from.

"The coronavirus is clearly now not just a China problem and global growth estimates in 2020 are being revised down. After a very tough 2019, where global trade volumes contracted for the first time since the financial crisis, it appears another year of weakness is in store as the virus wreaks havoc on global supply chains," Liberum's Ben Davies said.

The FTSE 100 index closed down 215.79 points, or 3.2%, at 6,580.61. The large cap index ended the week down 11% - its worst weekly performance since the 2008 financial crisis. The virus has wiped more than GBP200 billion off the FTSE 100's value this week alone.

The FTSE 250 ended down 452.53 points, or 2.3%, at 19,330.92, ending the week down 11%.

The AIM All-Share closed down 30.32 points, or 3.4%, at 856.64, and ended the week down 12%.

The Cboe UK 100 ended down 3.5% at 11,114.94, the Cboe UK 250 closed down 2.4% at 17,414.92, and the Cboe Small Companies ended down 3.7% at 11,376.90.

In Paris the CAC 40 ended down 3.4%, while the DAX 30 in Frankfurt ended down 3.9%.

On the London Stock Exchange, Rolls-Royce Holdings ended the best performer, up 3.2%, after the jet engine maker reported annual results which beat market consensus estimates.

Rolls-Royce recorded a pretax loss of GBP891 million for 2019, compared with GBP2.95 billion pretax loss a year ago, on a revenue of GBP16.59 billion and GBP15.73 billion, respectively. The narrowed loss was mainly due to sharply lower net financing costs, which fell 92% year-on-year to GBP178 million.

On an adjusted basis, annual pretax profit totalled GBP583 million for 2019, up 26% from GBP466 million a year ago and from GBP465 million consensus estimates.

Annual underlying operating profit - the company's preferred profit measure - jumped 32% year-on-year to GBP808 million. Consensus estimates saw underlying operating profit at GBP657 million.

Rolls-Royce retained its guidance for fixing Trent 1000 engines and said it remained on track to reduce aircraft on ground to single digits by the end of the second quarter of 2020.

"Overall Rolls Royce is a sum of many, very different, moving parts. The huge scale of its projects means there's always the chance everything won't go exactly right, and it won't always be a smooth ride. But not many companies can talk about generating a billion pounds worth of free cash, and at the end of the day, while jumbo jets still need new engines, Rolls will keep selling and servicing them," said analysts at Hargreaves Lansdown.

At the other end of the large cap index, travel stocks were among the worst performers as investors fretted over the impact of the coronavirus on global travel.

International Consolidated Airlines Group ended as one of the worst performers, down 8.4%. The British Airways parent warned it is currently experiencing demand weakness on Asian and European routes, resulting from the cancellation of industry events and corporate travel restrictions due to coronavirus.

IAG said it had "good" 2019, despite higher fuel prices hurting its operations during the year. The British Airways parent company reported revenue growth to EUR22.47 billion year-on-year from EUR21.40 billion, but pretax profit fell to EUR2.28 billion from EUR3.49 billion amid higher employee, fuel, engineering and finance costs.

Budget airline easyJet said it has seen "significant" softening of demand and load factors into and out of its northern Italian bases. The stock closed down 0.9%, while tour operator TUI closed down 8.5%, the worst performer on the FTSE 100.

London Stock Exchange Group ended down 3.0%. The stock exchange operator's Chief Executive David Schwimmer said the company is on track with its Refinitiv acquisition and said he is closely monitoring the deadly coronavirus outbreak.

Speaking in a call to the media this morning, Schwimmer was keen to stress the company is progressing its USD27 billion Refinitiv acquisition and is currently engaged in constructive discussions with the European Commission.

LSEG reported a rise in gross profit, slightly ahead of analyst consensus, as over-the-counter revenue saw double-digit growth.

For 2019, LSEG recorded pretax profit of GBP651 million, down 5.0% from GBP685 million the year before. The company's operating expenses rose 14% to USD971 million from USD855 million in 2018.

The clearing operator and market indices publisher also hiked its total dividend. LSE proposed a final dividend of 49.9 pence, taking its total dividend to 70.0 pence, a 16% increase on the 60.4p distributed in 2018.

The pound was quoted at USD1.2753 at the London equities close, down from USD1.2867 at the same time on Thursday.

The euro stood at USD1.1000 at the European equities close, up from USD1.0984 late Thursday.

In economic news from the continent, German consumer inflation came in at 1.7% on the year in February, unchanged from the January figure, despite rising food and energy costs, the Federal Statistical Office reported.

The figure was 1.5% in December and 1.1% in November.

The European Central Bank, which sets rates for the 19 members of the eurozone, including its largest member Germany, is currently reviewing its ultra-low rates policy in response to widespread criticism that it is putting savers at a disadvantage.

Stocks in New York were in free-fall again at the London equities close, suffering another steep decline as fears of an economic slowdown due to coronavirus hammered global markets. US bourses were on course to post the biggest weekly decline since 2008.

The Dow Jones Industrial Average was down nearly 1,000 points in early trade. The index already had shed more than 11% this week heading into Friday's session, having entered correction territory on Thursday.

The DJIA was down 3.7%, the S&P 500 index down 3.3% and the Nasdaq Composite down 3.0%.

There were fresh signs of the economic hit, with carrier United Airlines announcing it was grounding more flights to Asia, and survey results suggesting a big impact on shopping malls if the virus grows in the US.

United Airlines was down 3.6% on Wall Street.

On the US economic front, the core personal consumption expenditures price index rose 1.6% year-on-year in January accelerating from 1.5% in December, data published by the US Bureau of Economic Analysis showed. The inflation reading came in below the market expectation of 1.6%.

The data point is the US Federal Reserve's preferred gauge of inflation. The central bank's next two-day rate-setting meeting starts March 17. Investors are growing increasingly fearful the Fed will cut interest rates in a bid to support the economy as the coronavirus spreads to the US.

Brent oil was quoted at USD49.02 a barrel at the equities close, sharply lower than USD51.32 at the close Thursday. The North Sea benchmark fell to an intraday low of USD48.92 in afternoon trade as it fell below the USD50 mark for the first time since mid-2017.

Gold was quoted at USD1,585.25 an ounce at the London equities close, down sharply from USD1,655.10 late Thursday, despite its safe-haven appeal.

"Gold is lower on the day despite the bloodbath in stocks not to mention the fall in the US dollar too. When equities undergo a huge fall, traders normally funnel their cash into assets that are perceived to be lower risk – such as gold. The metal normally benefits from the decline in the greenback too as the commodity is listed in US dollars. There is chatter that gold is lower as traders are liquidating their long gold positions to fund their equity positions," said CMC Markets analyst David Madden.

Against the yen, the dollar was trading at JPY108.12, down from JPY110.58 late Thursday. The yen hit its highest level in a month against the greenback as investors flocked to the safe-haven currency amid virus fears.

"The lacklustre gold performance overnight saw traders shift into the yen, with the currency seemingly back in the driving seat as the number one haven in the FX market," said IG Group.

The economic events calendar on Monday has manufacturing PMI readings from France, Germany the eurozone, UK and the US at 0850 GMT, 0855 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.

The UK corporate calendar on Monday has annual results from insurer Hiscox and aerospace parts maker Senior.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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