LONDON MARKET CLOSE: FTSE Tumbles As Travel, Oil Stocks Slump

(Alliance News) - London stocks closed firmly in the red on Monday, though off the lows of the session, with the US Federal Reserve's weekend rate cut failing to lift sentiment.

Travel stocks ended as the worst performers as a raft of airlines cut capacity, while oil majors also sank as the price of Brent slipped.

The FTSE 100 index closed down 215.03 points, or 4.0%, at 5,151.08. During the session, London's index of large-caps dipped below the 5,000-mark for the first time since 2011.

The FTSE 250 ended down 1,212.25 points, or 7.8%, at 14,349.75, and the AIM All-Share closed down 77.88 points, or 11%, at 663.40.

The Cboe UK 100 ended down 3.9% at 8,664.86, the Cboe UK 250 closed down 8.1% at 12,482.87, and the Cboe Small Companies ended down 11% at 8,708.31.

"Though the Dow Jones opened sharply lower, in a rare sight the European indices didn't double down on their own losses, instead cutting the morning session's slump in half," said Connor Campbell at Spreadex.

In European equities on Monday, the CAC 40 in Paris ended down 5.8%, while the DAX 30 in Frankfurt ended down 5.3%.

Stocks in New York were in the red at the London close, with the DJIA down 8.2%, the S&P 500 index down 7.5%, and the Nasdaq Composite down 7.4%.

Markets failed to get much comfort from the US Federal Reserve slashing interest rates over the weekend.

The Fed, in its second emergency rate cut in less than two weeks, lowered the benchmark borrowing rate to a range of 0.00% to 0.25%, where it was during the 2008 global financial crisis, and pledged to keep it there "until it is confident that the economy has weathered recent events."

The central bank also announced massive asset purchases, opened its discount-lending windows to banks, making it easier for them to borrow from the Fed and urging them to use it to help businesses and households.

This was unable to stop equity markets tumbling at the start of the week, though stocks moved off their losses as the session progressed.

IG chief market analyst Chris Beauchamp said: "We may have reached the end of the 'panic' stage of the selloff, but any 'relief' stage may be short-lived. If there is a sustained recession ahead of us, then the declines we have seen may be just the beginning, and a short-term bounce in coming months may not hold."

In the US, airlines pared some early losses to be slightly lower by the London equities close. Delta Air Lines was down 2.8%, and American Airlines down 3.5%.

In London, though, travel stocks were safely among the worst performers.

British Airways parent International Consolidated Airlines ended down 27%, easyJet down 19%, Ryanair down 14%, TUI down 13%, and Carnival down 11%.

A number of London-listed airlines warned on capacity reduction amid the Covid-19 outbreak.

IAG said first-quarter capacity, or available seat kilometres, is expected to fall 7.5%. In April and May, IAG will reduce capacity by about 75% compared to the year before. IAG also is planning to ground surplus aircraft.

Ryanair expects travel restrictions to result in the grounding of the majority of its fleet across Europe over the next seven to ten days. For April and May, Ryanair now expects to reduce seat capacity by up to 80%.

easyJet has undertaken further "significant" cancellations amid reduced levels of customer demand. Meanwhile, Wizz Air has suspended all flights to Poland until further notice due to the Polish government's decision to impose travel restrictions on all foreign flights.

The announcements in London mirrored those in the US and Europe over the weekend after US President Donald Trump's administration banned foreign travellers arriving from Europe.

Meanwhile, cruise operator Carnival said the coronavirus pandemic will hurt financial 2020 results and liquidity, as it suspended operations of four additional North American cruise brands for one month.

The company has fully drawn down on its USD3 billion loan facilities to increase its cash position amid uncertainty caused by the coronavirus outbreak, adding the amount will be used for "working capital, general corporate or other purposes".

Carnival said it is in the process of taking action to improve liquidity, including capital expenditure and expense reductions, and pursuing additional financing.

"The turbulence in the aviation sector has added to the woes in the energy market. The major drop-off in flights should equate to a big fall in demand for oil plus oil-related products. The slump in the underlying energy market has hurt the share price of BP and Royal Dutch Shell," said David Madden at CMC Markets.

Brent oil was quoted at USD29.99 a barrel at the London equities close Monday from USD33.07 late Friday.

Shares in BP ended down 6.6%. Shell 'A' and 'B' shares both closed down 7.5%.

Meanwhile, B&Q owner Kingfisher, which had traded in the red for the majority of Monday's session, managed to close higher. The DIY retailer ended up 0.4%.

Kingfisher said, up to the past Saturday, the company has not experienced any dent in sales from the Covid-19 pandemic. In February, the company's like-for-like sales were 7.6% higher.

In the first two weeks of March, up to and including this past Saturday, Kingfisher said sales "continued to be positive".

"However, there is significant uncertainty on sales and demand as the outbreak spreads, and as central governments and businesses take action to contain and delay its impact," Kingfisher added.

In the FTSE 250, William Hill shares slumped 26%.

The bookmaker decided against the final dividend for 2019 and warned on a major impact on earnings due to Covid-19.

The pandemic has led to major sporting events around the world being cancelled or postponed. Some 53% of William Hill's revenue in 2109 came from sports betting.

William Hill is making forecasts assuming the European Football Championships this summer will be postponed, UK retail shops being forced to close for a month, as well as the Grand National and Royal Ascot horse racing events being cancelled.

If this happens, William Hill sees earnings before interest, tax, depreciation, and amortisation being knocked by GBP100 million to GBP110 million. If retail shops have to close, it would hurt Ebitda by GBP25 million to GBP30 million a month.

Earlier on Monday, rival GVC Holdings, the owner of Ladbrokes, warned Ebitda could be hit by as much as GBP150 million.

GVC shares closed down 23%.

In currency markets, the pound was quoted at USD1.2271 at the London close Monday, down compared to USD1.2392 at the close on Friday. The euro stood at USD1.1149, against USD1.1075.

Against the yen, the dollar was trading at JPY105.85, lower compared to JPY107.22.

Gold was quoted at USD1,508.34 an ounce against USD1,356.80.

The UK's corporate calendar Tuesday has full-year results from miner Antofagasta and half-year results from plumbing firm Ferguson, as well as IT infrastructure firm Softcat.

In the economic calendar on Tuesday, there is Japanese industrial production at 0430 GMT and UK unemployment and average earnings at 0930 GMT. Eurozone construction output is at 1000 GMT and the German ZEW survey due at the same time.

US retail sales are at 1230 GMT and industrial production at 1315 GMT.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.