LONDON MARKET MIDDAY: FTSE Falls As Virus Continues To Rattle Markets

(Alliance News) - London stocks continued the week's sell-off on Wednesday as the coronavirus outbreak gathered steam outside of China, with both Diageo and SSP warning of a hit to profit from its disruption.

The FTSE 100 was down 35.49 points, or 0.5%, at 6,980.51 on Wednesday, bringing the index 5.7% lower since the week began.

The mid-cap FTSE 250 index was down 278.31 points, or 1.3%, at 20,437.66, and the AIM All-Share index was down 2.8% at 903.83.

The Cboe UK 100 index was down 0.6% at 11,821.01. The Cboe 250 was down 1.6% at 18,392.72, and the Cboe Small Companies down 1.6% at 12,085.81.

In mainland Europe, the CAC 40 in Paris was down 0.9% while the DAX 30 in Frankfurt was down 1.3% in early afternoon trade on Wednesday.

"Victims of the coronavirus keep on climbing around the world and market participants are still struggling to evaluate both the commercial impact and the outlook of the situation. Uncertainty, the worst enemy of investors, still dominates markets worldwide, putting strong pressure on risk assets," said Pierre Veyret, technical analyst at ActivTrades.

Authorities in Italy reported that the number of people infected in the country has grown to 322 and 11 people have now died.

Austria, Croatia and Switzerland also reported their first cases linked to the outbreak in Italy, while Spain and France recorded new ones, also involving people who had been to northern Italy. France recorded its second death, a 60-year-old Frenchman who died in a Paris hospital.

The first positive test in South America has also been recorded in a 61-year-old Brazilian man who had recently been to northern Italy.

China, where the outbreak began, has reported 78,064 cases and 2,715 deaths, while South Korea has the second-highest number of cases with 1,261 and 11 deaths.

The disruption from the virus was becoming further apparent as Diageo and SSP became the latest companies to issue warnings on its impact.

Diageo, down 1.4%, warned of a significant dent to profit and sales due to the coronavirus outbreak.

The Johnnie Walker whisky maker expects a hit to organic net sales for its financial year ending June in a range of GBP225 million to GBP325 million. Diageo has guided for organic operating profit to be knocked in the range of GBP140 million to GBP200 million.

Diageo said the final impact will be determined by timing and the pace of recovery in China as well as several other Asian countries such as South Korea, Japan, and Thailand.

Meanwhile, SSP said February sales in the Asia Pacific region will be cut by half due to virus, which has forced the company into cost-cutting measures.

Ahead of its annual general meeting on Wednesday, SSP said it has seen a 90% year-on-year slump in air passenger numbers in China, with Hong Kong roughly 70% lower.

Accordingly, SSP expects February sales across the Asia Pacific region - which accounts for approximately 8% of group revenue - will halve on a year ago. Together with the impact in the Middle East and India, this is expected to reduce group revenue in February by around GBP10 million to GBP12 million. This will result in a knock-on hit to operating profit of around GBP4 million to GBP5 million.

Outside of coronavirus-related updates, Taylor Wimpey was the biggest faller in the FTSE 100, down 3.5%.

Revenue in 2019 came in 6.4% higher at GBP4.34 billion from GBP4.08 billion, with the housebuilder's pretax profit rising 3.1% to GBP835.9 million from GBP810.7 million.

Operating profit in 2019 was GBP850.5 million, down from GBP880.2 million in 2018, with an operating profit margin of 19.6%, down from 21.6% in 2018.

Looking ahead, Taylor Wimpey said it expects volumes for 2020 and its operating profit margin in the first half of 2020 will show pressure from 2019 build cost inflation and selling prices as well as long term investment in quality and business improvement.

In the FTSE 250, Weir shares gained 6.4% on news it is looking to exit its Oil & Gas business.

For 2019, the Glasgow-based engineering firm posted a reported pretax loss of GBP372 million, compared to a profit of GBP86 million the year before, due to an impairment charge of GBP546 million recognised in the Oil & Gas North American cash generating unit.

Weir said its focus going forward was to become a "pure play" mining technology firm and added it was "looking for opportunities to maximise value from the oil and gas business at the right time".

Restaurant Group slumped 6.4% as it suspended its dividend and announced plans to shut sites.

The dividend has been halted as London-based Restaurant Group embarks on a plan to grow Wagamama, as well as its Concessions and Pubs businesses. It will also begin closing sites in the Leisure unit, targeting between 260 to 275 sites by the end of 2021, with 350 currently open.

Turning to results for the 52 weeks to December 29, Restaurant Group's like-for-like sales rose 2.7%, with total sales rising 56% to GBP1.07 million due to the addition of Wagamama.

Restaurant Group posted a pretax loss of GBP37.3 million, compared to a GBP13.9 million profit the year before. The adjusted pretax profit figure was 40% higher at GBP74.5 million.

Elsewhere in London, Metro Bank shares slid 17% as the lender sank to a loss for 2019.

In 2019, the challenger bank recorded a pretax loss of GBP130.8 million, compared to a GBP40.6 million profit in 2018. The loss includes GBP68 million of intangible asset write-downs from discontinuing certain "work projects" or removing older IT projects that no longer meet with the bank's new strategy.

Net interest income slipped 6.7% year-on-year to GBP308.1 million from GBP330.1 million. Total income, however, was up 2.8% to GBP415.6 million.

The US is on course for a moderately lower start on Wednesday. The Dow Jones is seen down 0.3%, the S&P 500 down 0.1% and the Nasdaq off 0.2%.

In forex, sterling was quoted at USD1.2938 on Wednesday, lower than USD1.3009 at the London equities close on Tuesday.

The euro traded at USD1.0881, flat compared to USD1.0879 late Tuesday. Against the yen, the dollar was quoted at JPY110.47, firm versus JPY110.12.

The yen, thought of as a safe haven currency, is being "held back by Japan's lack of growth and proximity to the epicentre of the Covid-19 epidemic", said Kit Juckes at Societe Generale.

Gold was quoted at USD1,648.46 an ounce early Wednesday, firm versus USD1,646.81 on Tuesday. Brent oil was trading at USD54.15 a barrel early Wednesday, lower than USD55.50 late Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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