LONDON MARKET MIDDAY: FTSE 100 Dips Back Into Red; Pound In Doldrums

(Alliance News) - The FTSE 100 remained shaky on Thursday, slipping back into negative territory by midday despite some strong gains earlier in the morning.

David Madden at CMC Markets said the European Central Bank's stimulus package had "limited success", though managed to calm markets a bit.

The FTSE 100 was down 95.76 points, or 1.9%, at 4,984.82 on Thursday. At midday, the index was down nearly 200 points from the day's high of 5,166.63, which was reached in the morning.

The blue-chip index's losses were still more moderate than the 4.1% decline posted on Wednesday.

The mid-cap FTSE 250 index was down 468.49 points, or 3.6%, at 12,539.70. The AIM All-Share index was down 1.2% at 582.46.

The Cboe UK 100 index was down 2.1% at 8,449.04. The Cboe 250 was down 3.5% at 10,947.65, and the Cboe Small Companies down 1.6% at 7,527.51.

In mainland Europe, the CAC 40 in Paris was down 0.4% while the DAX 30 in Frankfurt was down 0.7% on Thursday.

The European Central Bank late Wednesday unexpectedly said it would spend EUR750 billion on "emergency" bond purchases, as it joined other central banks in stepping up efforts to contain the economic damage from the coronavirus.

The so-called Pandemic Emergency Purchase Programme comes just six days after the ECB unveiled another big stimulus package that had failed to calm nervous markets, piling pressure on the bank to open the financial floodgates.

The decision came after the bank's 25-member governing council held emergency talks by phone late into the evening, following criticism the bank wasn't doing enough to shore up the eurozone economy.

The ECB's move came amid dire news out of Italy, which reported 475 new deaths. More than 8,700 people have died around the world with fatalities in Europe now topping those in Asia, where the outbreak began in December in China.

With the number of global coronavirus infections shooting past 200,000, governments announced new containment measures and the US Congress approved a USD100 billion emergency relief package.

The euro traded at USD1.0737 on Thursday, down from USD1.0840 late Wednesday. Against the yen, the dollar was quoted at JPY109.91 versus JPY108.37.

Sterling, meanwhile, was trading around 35-year lows. The pound was quoted at USD1.1539 midday Thursday, lower than USD1.1755 at the London equities close on Wednesday.

"The pound is quite simply collapsing on currency markets. The U-turn of Boris Johnson's government on the measures to be adopted for containing the coronavirus generated a new selloff on the pound. In just 72 hours the government changed its mind and closed schools, and asked people to limit all non-essential travel. Markets are pricing a likely lockdown of the country with the pound now at a 35-year low against the US dollar," said Carlo Alberto De Casa, chief analyst at ActivTrades.

Emergency legislation to tackle the coronavirus outbreak will be published in parliament after UK Prime Minister Boris Johnson announced the closure of schools and cancellation of exams.

The legislation will be presented as the Army prepares to help out in the crisis and London faces the prospect of greater restrictions, with the capital suffering a faster spread of Covid-19.

So far, 104 people have died after testing positive for coronavirus in the UK and tens of thousands of people are thought to be infected.

Johnson said measures taken so far were helping to slow the spread of the disease, but he did not rule out tougher measures being enforced down the line. He also did not rule out stricter controls being imposed on London ahead of the rest of the nation, with fears of a lockdown being imposed like in other nations.

Gold was priced at USD1,473.76 an ounce on Thursday, lower than USD1,491.90 on Wednesday. Brent oil was trading at USD25.99 a barrel, soft on USD26.08 late Wednesday.

Wall Street is pointed to a lower open on Thursday. The Dow Jones is seen down 1.8%, the S&P 500 down 1.7% and the Nasdaq own 0.8%.

In the FTSE 100, Meggitt shares were down 11%. The aerospace and defence contractor said it is too early to give any annual financial guidance, though performance so far this year has met expectations.

Meggitt said that despite a "rapidly changing" environment, trading in January and February met expectations. Christchurch, Dorset-based Meggitt said the outlook in the near-term for its products is uncertain, but it has in place plans to reduce costs and protect liquidity in the coming months.

Meggitt also confirmed it is working with a consortium of other UK aerospace suppliers to develop and produce "in large volumes" a ventilator, at the request of the UK government.

Burberry shares slumped 7.0% as the luxury retailer said sales have "deteriorated" sharply over the past six weeks due to the Covid-19 pandemic.

The firm, known for its checked print and trenchcoats, warned that its fourth quarter comparable retail stores sales will fall 30% year-on-year, with the final weeks of the 12 months to the end of March seeing a slump of as much as 80%.

Comparable retail stores sales are tracking between 40% and 50% lower since January 24, Burberry explained.

Bucking the wider FTSE 100 was clothing retailer Next, up 6.6%.

Next reported a rise in full-year sales, helped by double-digit growth in its online unit but said that, due to the Covid-19 health crisis, it will not declare a final payout but will instead propose a second interim dividend in June.

Pretax profit during the recent year rose 2.0% to GBP748.5 million from GBP733.6 million. Excluding IFRS 16, an accounting rule governing the financial treatment of leases, pretax profit edged 0.8% higher to GBP728.5 million from GBP722.9 million.

Next, which carried a detailed "stress test" on the effect of the virus outbreak, warned that its full-year sales for the recently-commenced financial year could fall by as much as 25%.

Surging to the top of the FTSE 250 was Elementis, shares nearly tripling to 50.46 pence as the chemicals firm decided against paying its final dividend for 2019 as it looks to preserve cash for Covid-19.

London-based Elementis declared a final dividend for 2019 of 4.4487 pence per share at the time of 2019 results early in March. At the same time, it reported a 6.7% fall in pretax profit despite revenue climbing over 6%, due to higher finance costs and a loss on a disposal. However, the company has decided not to pay this dividend, which it said will save it USD33 million in cash.

Future dividend decisions will be made "as and when conditions normalise".

The firm said trading up to March 18 had been "solid", with a limited impact from Covid-19 on production and demand. However, the outbreak is providing significant uncertainty going forward.

Crest Nicholson shares were down 20% after the housebuilder cancelled its 21.8 pence per share final dividend and suspended all financial guidance until the impact of the Covid-19 spread "becomes clearer".

Crest said that although the measures are "significant steps to take", it is a prudent move amid the "unprecedented and unpredictable situation". Crest Nicholson said it has moved to fully draw a GBP250 million credit facility, which would leave the company with available cash of GBP185 million.

Crest Nicholson was not alone - most other housebuilders were lower on Thursday.

"Despite promises of help from the chancellor, there are real worries over how businesses and individuals will manage to navigate a hugely disruptive period. With a squeeze on income across the country, and the end to building work, it comes as no surprise that markets are seeing the housebuilders as a potential sector which will struggle through this crisis," said Joshua Mahony, senior market analyst at IG.

Shares in Barratt Developments were down 9.5%, Taylor Wimpey down 8.7% and Persimmon down 3.3%.

By Lucy Heming; lucyheming@alliancenews.com

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