LONDON MARKET CLOSE: Stocks Mixed As Virus Deaths Rise Outside China

Thu, 20th Feb 2020 17:05

(Alliance News) - Stocks prices in London ended mixed on Thursday as investors mulled the spike in new coronavirus cases outside of China amid concerns over the economic effects of the outbreak.

China on Thursday touted a big drop in new virus infections as proof its epidemic control efforts are working, but the toll grew abroad with deaths in Japan and South Korea.

Fatalities in China hit 2,118 as 114 more people died, but health officials reported the lowest number of new cases in nearly a month, including in hardest-hit Hubei province. The number of deaths outside mainland China climbed to 11.

Japan's toll rose to three as a man and a woman in their 80s who had been aboard a quarantined cruise ship died, while fears there mounted about other passengers who disembarked the Diamond Princess vessel after testing negative.

South Korea reported its first death, and the number of infections in the country nearly doubled Thursday to 104 - including 15 at a hospital in Cheongdo county.

The FTSE 100 index closed down 20.38 points, or 0.3%, at 7,436.64. The FTSE 250 ended up 15.83 points, or 0.1%, at 21,866.69 , and the AIM All-Share closed up 1.92 points, or 0.2%, at 975.18.

The Cboe UK 100 ended down 0.1% at 12,611.61, the Cboe UK 250 closed up 0.3% at 19,738.02, and the Cboe Small Companies ended up 0.1% at 12,489.75.

In Paris the CAC 40 ended down 0.8%, while the DAX 30 in Frankfurt ended 0.9%.

CMC Markets analyst Michael Hewson said: "European markets have taken a bit of a pause today as investors mull over whether there is scope to drive stocks much higher against a backdrop of a coronavirus, which appears to be starting to spread beyond China to Japan and South Korea, as cases there rise, with millions of South Koreans being urged to stay at home.

"This caution is entirely understandable, given that recent gains in global stock markets have been predicated on the basis that any ripple out effects from the coronavirus are likely to be transitory in nature, and yet the main headlines appear to show that it is spreading out beyond China. While these concerns are entirely valid, the lack of significant downside today suggests that while investors are concerned about the virus moving beyond China's borders, they still remain some way off from looking to move out of stocks in the short term."

In the FTSE 100, Smith & Nephew ended up 7.3% after the medical devices maker reported mid-single-digit revenue growth in 2019, but profit slipped due to an increase in costs.

The company reported pretax profit of USD743 million in 2019, down 4.9% from USD781 million in 2018, amid higher selling, general & administrative expenses, which rose to USD2.69 billion from USD2.50 billion. Revenue, meanwhile, grew by 4.8% to USD5.14 billion from USD4.90 billion year-on-year.

Smith & Nephew declared a 23.1 US cents a share final dividend, taking the total distribution to 37.5 US cents, up 4% year-on-year.

Looking forward, Smith & Nephew said it expects its underlying revenue growth to be in the range of 3.5% to 4.5% in 2020. In addition, the company said it expects to deliver a 2020 trading profit margin at or slightly above 2019 level of 22.8%. In 2018, trading margin stood at 22.9%.

BAE Systems closed up 2.2% after the defence giant reported a rise in sales and revenue and said 2019 had been "a year of significant progress for the company".

The Farnborough-based company said revenue was GBP18.3 billion, up 8.9% from GBP16.8 million in 2018. Bloomberg consensus, provided by BAE, expected GBP19.8 billion in revenue. The company said good results were underpinned by improving operational performance as governments in key markets continue to prioritise defence and security.

Pretax profit was 33% higher at GBP1.6 billion compared to GBP1.2 billion in 2018, while underlying earnings before interest, tax, depreciation and amortization was GBP2.2 billion compared to GBP1.9 billion a year ago.

BAE proposed a final dividend of 13.8 pence. making a total of 23.2p per share for the year, an increase from 22.2 pence in 2018.

Looking ahead, the company said it expects 2020 underlying earnings per share to "grow by mid-single digit percentage".

Lloyds Banking Group closed up 1.4% after the lender reported a sharp fall in profit for 2019, which was blamed on a significant rise in payment protection insurance provisions, but said it was pleased with its underlying performance. In 2019, Lloyds recorded pretax profit of GBP4.39 billion, which was down 26% on 2018's GBP5.96 billion and 1.8% below the GBP4.47 billion consensus of market forecasts compiled by the company.

On an underlying basis, net interest income was GBP12.38 billion, which was in line with market consensus, but 2.6% lower year-on-year from GBP12.71 billion. Net income totalled GBP17.14 billion, again in line with consensus, but down 3.5% from GBP17.77 billion in 2018.

The bank upped its total dividend for 2019 to 3.37 pence, 5.0% higher than the 3.21p distributed in 2018.

In addition, Lloyds reduced Chief Executive Antonio Horta-Osorio's pay by 28% to GBP4.73 million for 2019 as a result of the steep drop in profits, while the wider staff bonus pool was cut by 33% to GBP310.1 million.

At the other end of the large cap index, Imperial Brands ended the worst performer, down 6.7% after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.

In the FTSE 250, Moneysupermarket.com ended the standout performer, up 19% after the price comparison website reported positive annual results.

In 2019, revenue was 9.2% higher at GBP388.4 million from GBP355.6 million in 2018, with pretax profit rising 8.5% to GBP116.0 million from GBP106.9 million. Earnings per share amounted to 18.2p in 2019, up 5% on the year before.

Moneysupermarket lifted its full-year payout 6.0% to 11.71 pence per share from 11.05p.

The pound was quoted at USD1.2882 at the London equities close, down from USD1.2947 at the close Wednesday, despite positive UK retail sales figures.

UK retail sales grew ahead of market expectations in January, according to the Office for National Statistics.

Retail sales were up 0.9% in January month-on-month, recovering after falls in the previous two months. January's rebound was largely due to moderate growth in both food and non-food stores, the ONS said. Year-on-year, the volume of retail sales in the UK were up 0.8%. FXStreet consensus had pencilled in a rise of 0.7% on both a monthly and annual basis.

"January's retail sales figures showed that December's election result gave consumers the confidence to reopen their wallets. The more recent flooding and effects of the coronavirus may hinder sales in February and March. Nonetheless, it still seems as though the economy turned a corner at the start of the year," said analysts at Capital Economics.

Sterling hit an intraday high of USD1.2918 immediately after the release of UK retail sales figures at 0930 GMT, but was unable to sustain any positive momentum against the surging dollar.

Analysts at FXPro told Alliance News: "US dollar continues and widens its rally against major currencies. The dollar index has been adding 0.3%, reaching 99.80, the highest level since April 2017. Investors should note that some currencies are almost on the verge of freefall to USD, especially Japanese Yen, Australian and New Zealand Dollar.

"Despite UK retail sales being above expectations, it failed to keep the pound from weakening below 1.2970 - the low since November. It creates very nervous attitude on the markets inspiring pound selloff, despite relatively good macro news. Besides, pound develops its correction in the pair with Euro, after touching 4-years lows."

The euro stood at USD1.0794 at the European equities close, flat from USD1.0793 a day before.

Against the yen, the dollar was trading at JPY112.10, up sharply from JPY110.93 late Wednesday, trading at a 10-month low against a broadly stronger greenback.

The yen has been under pressure following weak GDP from Japan earlier in the week, sparking fears the Japanese economy could be about to enter a recession.

"USD/JPY is up over 200 pips since Tuesday, crossing above 112.00 during European hours. If you are looking for a reason, its difficult to pinpoint one. Some of this may stem back to the poor GDP data out of Japan on Monday, and the threat of further poor data in the months ahead may be likely. However, poor data hasn't really mattered in Japan for a while now. Ironically, investors actually would buy yen on any poor data from any country. including Japan, as the yen has always been considered the "safe-haven currency," said City Index analyst Joe Perry.

"That may have changed recently, as fears spread into Japan that the coronavirus may begin to affect daily life and the further slowdowns may be ahead," Perry added.

Stocks in New York were subdued at the London equities close, following a strong finish on Wednesday which saw record closes for the tech-rich Nasdaq and broad-based S&P 500, while the benchmark Dow Jones Industrial Average also posted a solid gain.

The DJIA was down 0.1%, the S&P 500 index as flat and the Nasdaq Composite was down 0.2%.

On the corporate front, US consumer goods giant Procter & Gamble Co followed tech giant Apple in becoming the latest firm to warn over the effects of the coronavirus.

Speaking at the consumer Analyst Group of New York 2020 Conference, P&G Chief Operating Officer & Chief Financial Officer Jon Moeller said the company is facing demand and supply "challenges" in China.

He said: "China is our second largest market for sales and profit. Store traffic is down considerably, with many stores closed or operating with reduced hours. Some of the demand has shifted online but supply of delivery operators and labour is limited."

He continued: "The operating challenges change with the hour, and of course the path of the virus is unknown, making it very difficult to provide precise estimates of impact."

As a result, P&G's third quarter, ending March, expected to take a "material" hit.

The stock was up 0.3% in New York.

Brent oil was quoted at USD59.75 a barrel at the equities close, up from USD58.88 at the close Wednesday, rising for the eighth successive session as fears over the coronavirus health crisis eased.

In addition, the US Energy Information Administration reported a build in US crude oil inventories in the week ending February 14, of 414,000 barrels. Expectations stood at an increase of 2.49 million barrels. A lower increase in stored oil is positive for oil prices.

Gold was quoted at USD1,621.15 an ounce at the London equities close, up from USD1,605.82 late Wednesday.

The economic events calendar on Friday has PMI readings from France at 0815 GMT, Germany at 0830 GMT, the eurozone at 0900 GMT, the UK at 0930 GMT and US at 1445 GMT.

The UK corporate calendar on Friday has annual results from education publisher Pearson and Irish building materials company Kingspan Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com