LONDON MARKET MIDDAY: FTSE Hammered By Virus Fears, Travel Stocks Sink

(Alliance News) - The FTSE 100 continued to plummet on Monday as fears over the spread of coronavirus across Europe as well as Asia dealt a blow to travel stocks.

"The growing number of new cases in Wuhan and, more importantly, outside China has seen investors adopt a more cautious trading stance this week. The situation in South Korea, where the virus alert is set at the highest level, sparked fresh concerns about the rate of spread of the virus as well as the damage being done to Asian economies," said Pierre Veyret, technical analyst at ActivTrades.

The FTSE 100 index was down 252.73 points, or 3.4%, at 7,151.19 on Monday. The FTSE 250 was down 698.31 points, or 3.2%, at 21,081.89, and the AIM All-Share was down 2.5% at 948.14.

The Cboe UK 100 index was down 3.3% at 12,114.93. The Cboe UK 250 was down 3.4% at 19,007.98, and the Cboe UK Small Companies was down 1.3% at 12,404.24.

In European equities, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 3.7%. Stocks in Italy were even harder hit, with the FTSE MIB down 1,000 points, or 4.7%, in early afternoon trade.

In Italy, a fourth fatality was confirmed on Monday, deepening fears about the virus spreading through Europe.

More than 150 people have been infected in Italy. Eleven towns – 10 in Lombardy and 1 in neighbouring Veneto – are under lockdown, with some 50,000 residents prohibited from leaving.

A second person also died in South Korea, where the numbers of cases spiked, authorities said Saturday, while the death toll in Iran reached five and a number of new cases were reported across the Middle East.

The outbreak has now claimed 2,345 lives in China and infected more than 76,000 people. The number of new cases in China outside Hubei has been generally declining, although new outbreaks have emerged in several prisons and hospitals.

The US is also set for a lower start in the wake of the virus spread, with the Dow Jones pointed down 2.8%, the S&P down 2.7% and the Nasdaq down 3.2%.

Gold was quoted at USD1,682.32 an ounce Monday midday, the safe haven asset up sharply from USD1,643.10 late Friday and continuing to trade around fresh seven-year highs.

This move saw gold miners rise, with Fresnillo up 4.0% and Hochschild up 1.9%. Precious metals firms were, though, among few gainers in the FTSE 100 on Monday.

"Airlines, car makers and luxury goods stocks were among the big fallers on both European and UK markets. TUI, easyJet and International Consolidated Airlines were among the biggest fallers on the London Stock Exchange, perhaps implying that investors are fearful that consumers and business people may lose their appetite to travel," said Russ Mould at AJ Bell.

easyJet was the biggest faller in the FTSE 100, down 12%, while TUI sank 8.6% and British Airways parent International Consolidated Airlines was down 7.2%. Ryanair sank 11%.

Elsewhere in the FTSE 100, Associated British Foods was down 1.7%.

The ingredients and clothing retailer said it expects progress in its half-year results, helped by a sales rise at its Primark retail arm, which is yet to experience any short-term pain from the coronavirus outbreak.

AB Foods said it built inventories before the Chinese new year, when the virus initially spread through Wuhan. The risk of supply shortages could be prevalent towards the end of the financial year however, AB Foods cautioned, if delays to factory production continue.

The company, which ends its first half on February 29, expects growth in sales and adjusted operating profit to rise from GBP639 million in the year prior. However, on a reported basis, the dilutive effect of the adoption of accounting standard IFRS 16 on earnings will result in a "small reduction in adjusted earnings per share in the first half".

At Primark, first half sales are tipped to come in 2.5% higher year-on-year, and up 4.2% at constant currency. Like-for-like sales are flat, the company said.

Among only three blue-chip companies in London to be posting share price gains on Monday, Bunzl was up 1.4% as the the distribution firm reported a rise in profit for 2019.

For 2019, revenue rose 2.7% to GBP9.33 billion from GBP9.08 billion in 2018, helping pretax profit increase by 6.7% to GBP453.3 million from GBP424.8 million. By segment, only a 1.7% revenue decline to GBP1.24 billion in the UK & Ireland prevented growth across the board.

In North America, revenue climbed 3.7% to GBP5.47 billion and in Continental Europe by 1.8% to GBP1.83 billion. In the Rest of the World, revenue rose by 5.6% to GBP781.6 million.

In forex, the pound was quoted at USD1.2907 on Monday, down from USD1.2970 at the London equities close Friday. The euro was quoted at USD1.0821, lower versus USD1.0863 late Friday.

The safe haven yen strengthened in the risk-off environment. Against the yen, the dollar was trading at JPY111.27, down from JPY111.72.

Oil, though, was under pressure. Oil was quoted at USD56.12 a barrel Monday on demand worries, down from USD57.80 late Friday.

By Lucy Heming; lucyheming@alliancenews.com

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