LONDON MARKET CLOSE: FTSE Dented By Apple Sales Warning, HSBC Results

Tue, 18th Feb 2020 16:59

(Alliance News) - The FTSE 100 shed just over 50 points on Tuesday as a sales warning from iPhone maker Apple overnight set the mood for the session, with concerns over the fallout from the spread of coronavirus dominating.

Ending as the worst blue-chip performer in London was HSBC after the bank unveiled a major restructuring plan, with 15% of its global workforce to be cut.

The FTSE 100 index closed down 51.24 points, or 0.7%, at 7,382.01. The FTSE 250 ended down 147.88 points, or 0.7%, at 21,678.46, and the AIM All-Share closed down 4.42 points, or 0.5%, at 964.54.

The Cboe UK 100 ended down 0.9% at 12,484.96, the Cboe UK 250 closed down 0.8% at 19,542.65, and the Cboe Small Companies ended down 0.1% at 12,446.46.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.5%, while the DAX 30 in Frankfurt dipped 0.8%.

Tuesday's downbeat session for equities in Europe came after tech giant Apple overnight said that disruption due to the novel coronavirus had hit both production and demand in China, and the company was "experiencing a slower return to normal conditions" than planned.

"We do not expect to meet the revenue guidance we provided for the March quarter," it said in a statement, adding that worldwide iPhone supply would be "temporarily constrained" and demand in China had been affected.

Apple had forecast revenue of USD63 billion to USD67 billion for the second quarter to March.

"This is likely the first of many profit warnings as the coronavirus continues to wreak havoc in the world's second largest economy," said Craig Erlam at Oanda.

"Companies have varying degrees of exposure to the Chinese market but as we've see over the last few weeks, the disruption has been significant and widespread," he said. "Apple is the first but it certainly won't be the last, or the most severely impacted."

Stocks in New York were lower at the London equities close, with the Dow Jones down 0.7%, the S&P 500 index down 0.5%, and the Nasdaq Composite 0.3% lower.

The Nasdaq was posting moderate losses despite Apple shares slipping 2.4% in morning trade.

Aside from Apple, focus also lay on the eurozone on Tuesday following some disappointing economic sentiment data.

The ZEW economic sentiment indicator posted 8.7 points in February, down from 26.7 in January, and also lower than the 10.7 in December. FXStreet consensus had seen a reading of 21.5 for February.

The indicator assessing the current situation in Germany also declined in February, with the survey dropping to minus 15.7 points from minus 9.5 points in January.

ZEW also noted that eurozone economic sentiment dropped considerably to 10.4 points in February from 25.6 in January. In addition, the indicator for the current economic situation declined further to minus 10.3 points from minus 9.9 points.

The euro softened following the data. The single currency stood at USD1.0817 at the European equities close Tuesday, against USD1.0836 at the same time on Monday.

The pound was quoted at USD1.3021 at the London equities close Tuesday, meanwhile, compared to USD1.3013 at the close on Monday.

"The pound has enjoyed a day of gains in the wake of a welcome bout of positive jobs data this morning. Declines in earnings growth do put a dampener on sentiment somewhat, yet a sharp decline in claimants across both February and January figures provides plenty of reason for optimism," said Joshua Mahony, senior market analyst at IG.

The unemployment rate was stable at 3.8% in the October to December period, in line with the reading for the three months to November. It was, though, 0.1 of a percentage point lower than the previous quarter.

Average weekly earnings growth slowed to 2.9% for total pay, which includes bonuses, from 3.2% the month before. For regular pay, which strips out bonuses, this decelerated to 3.2% from 3.4%.

Elsewhere in forex, the Japanese yen strengthened with safe havens in vogue amid Tuesday's risk-off mood. The dollar was trading at JPY109.81 compared to JPY109.91 late Monday.

Gold, also thought of as a safe haven asset, was quoted at USD1,602.83 an ounce at the London equities close Tuesday against USD1,582.14 at the close on Monday.

Meanwhile, Brent oil was quoted at USD57.08 a barrel at the London equities close Tuesday from USD57.34 late Monday.

In London, HSBC ended the session as the worst blue-chip performer amid a fall in annual profit and a substantial restructuring plan.

The stock closed down 6.6%.

For 2019, Europe's largest lender saw pretax profit drop by 33% to USD13.34 billion from USD19.89 billion the year before.

Profit was hurt by a total goodwill impairment of USD7.35 billion, with USD4.0 billion coming from HSBC's Global Banking & Markets division, and USD2.5 billion from Commercial Banking, reflecting lower long-term economic growth assumptions and the planned reshaping of the Global Banking & Markets unit.

Meanwhile, HSBC is set to cut 15% of its global workforce as it embarks on a radical cost-cutting plan, the bank's interim chief said Tuesday.

"It's fair to say that our direction of travel will be to move the current headcount of 235,000 to be closer to 200,000 over the next three years," Noel Quinn told Bloomberg News in an interview.

HSBC has set itself a new return on tangible equity target of between 10% and 12% for 2022, and intends to maintain its dividend and continues to plan for a CET1 ratio at the top end of its 14% to 15% target. The lender will, however, suspend its share buybacks for 2020 and 2021.

Shore Capital described the strategy update as "underwhelming".

Not too far behind was miner Glencore, shedding 5.0% as it posted a fall in earnings for 2019, though this was expected.

The blue-chip miner posted adjusted earnings before interest, tax, depreciation and amortisation of USD11.60 billion for 2019, 26% lower than the year before. However, according to company-compiled analyst consensus the market had forecast adjusted Ebitda of USD11.25 billion.

Ending higher in the FTSE 100 was InterContinental Hotels Group, up 1.6%.

IHG reported a 6.9% rise in 2019 revenue to USD4.63 billion from USD4.33 billion in 2018. Pretax profit came in at USD542 million for 2019, up 12% from USD482 million in 2018.

IHG said its increased revenue came as a primary result of "5.6% rooms growth and the annualised benefit of an addition of a portfolio of hotels in the UK in mid-2018".

Severn Trent closed up 1.2% after JPMorgan raised the water firm to Neutral from Underweight.

Elsewhere in London, Amigo Holdings closed up 6.8% after confirming it received interest from "several" parties after putting itself up for sale.

Amigo launched a strategic review and formal sale process at the end of January. A sale could include the whole company, parts of it, the UK business, or a de-listing.

"Amigo has received indications of interest from several parties. Interested parties have entered into non-disclosure agreements with the company and discussions are ongoing," Amigo said on Tuesday.

Richmond sausage maker Kerry closed up 4.3% after the Irish foods firm said it was "pleased" with its performance in 2019.

Kerry's revenue for 2019 was EUR7.24 billion, 9.6% higher than the year before. Volume growth in Taste & Nutrition was 4.0%, Kerry continued, but Consumer Foods volumes fell 2.2% due to a contract exit in ready meals previously announced.

Kerry's pretax profit for the year was 4.5% higher at EUR645.9 million, with the figure before non-trading items 11% higher at EUR756.8 million.

In the UK corporate calendar for Wednesday, there are annual results from gold miner Hochschild Mining.

In Wednesday's economic calendar there is UK inflation at 0930 GMT and US producer prices at 1330 GMT, followed by minutes from the last Federal Reserve meeting at 1900 GMT.

By Lucy Heming; lucyheming@alliancenews.com