LONDON MARKET MIDDAY: Stocks Slip As Worries Over Covid-19 Rise Again

(Alliance News) - Stocks remained lower at midday in London as Spain recorded a second day of rising Covid-19 deaths on Wednesday, shaking hope that Europe was starting to turn a corner in the fight against coronavirus.

The FTSE 100 index was down 79.39 points, or 1.4%, at 5,625.06 Wednesday midday. The mid-cap FTSE 250 index was down 79.00 points, or 0.5%, at 15,489.96. However, the AIM All-Share index was up 1.2% at 720.57.

The Cboe UK 100 index was down 1.3% at 9,526.52. The Cboe 250 was flat at 13,364.13, and the Cboe Small Companies up 0.1% at 8,237.60.

In mainland Europe, the CAC 40 in Paris was down 1.7%, while the DAX 30 in Frankfurt was down 1.1% early afternoon on Wednesday.

"European markets are on the slide this morning, with recent optimism over the turning tide of the coronavirus starting to come under pressure. While many had focused on the experience of countries such as Spain and Italy, we are seeing daily deaths within the UK, US, Germany, and France continue to rise," said Joshua Mahony, senior market analyst at IG.

Spain recorded a second successive daily rise in coronavirus-related deaths with 757 fatalities, lifting the total toll to 14,555, the health ministry said Wednesday.

The number of new infections in the world's second hardest-hit country after Italy also grew to 146,690, up from 140,510, it added.

Virus deaths hit a new daily high in Britain, the government reported on Tuesday, where 55-year-old leader Boris Johnson was said to be "stable" and in "good spirits" despite receiving oxygen treatment in intensive care.

And Paris toughened its lockdown measures, banning daytime jogging to keep people from bending the rules as France breached 10,000 deaths.

A total of 1,939 people died in the US over the past 24 hours, according to a tally by Johns Hopkins University on Tuesday, as the country approaches tolls in worst-hit Italy and Spain. In New York, Governor Andrew Cuomo said the state appeared to be nearing the peak of its outbreak but urged citizens to continue staying indoors.

Meanwhile, EU finance ministers failed on Wednesday to agree on a bailout plan to help hard hit member states cope with the economic effects of the coronavirus outbreak, after Italy refused to abandon its demand for "coronabonds" to share the burden.

"After 16 hours of discussions, we came close to a deal but we are not there yet. I suspended the Eurogroup and [we will] continue tomorrow Thursday," said Eurogroup chief Mario Centeno.

A proposal for coronabonds is being resisted by Germany, the Netherlands and other rich northern countries, which see it as an attempt by the indebted south to unfairly take advantage of the north's fiscal discipline.

The euro traded at USD1.0872 midday Wednesday, lower than USD1.0890 late Tuesday. Sterling was quoted at USD1.2332 on Wednesday, marginally firm on USD1.2325 at the London equities close on Tuesday.

"Yesterday markets were buoyed by a reduction in the number of new coronavirus cases, triggering some gains for the euro and the pound against the greenback. However, today apprehension is back," said Ricardo Evangelista, senior analyst at ActivTrades.

The Japanese yen edged higher on Wednesday, however, but there was no such luck for fellow safe haven, gold.

The dollar was quoted at JPY108.82, down on JPY109.01 late Tuesday. Meanwhile, gold was quoted at USD1,650.37 an ounce, lower than USD1,655.70 on Tuesday.

Brent oil was trading at USD32.00 a barrel on Wednesday, down from USD33.02 late Tuesday as traders await Thursday's OPEC+ meeting.

London-listed oil stocks were lower as a result, with BP shares down 3.9% and Royal Dutch Shell 'A' and 'B' shares down 2.5% and 2.1% respectively.

The worst blue-chip performer in London, however, was insurer Aviva, down 7.8% after it pulled its dividend.

Last Thursday, the European Insurance & Occupational Pensions Authority called on insurers to "suspend all discretionary dividend distributions and share buy backs".

The UK Prudential Regulation Authority also last week wrote a letter requesting that insurance companies be prudent in their approach to dividends. The PRA had leaned on UK banks as well to withhold dividends in order to retain money for lending, with which all complied.

On Wednesday, RSA and Aviva pulled their 2019 final payouts, as did 250-listed insurers Direct Line Insurance Group and Hiscox.

Aviva said it "recognises the importance" of a cash dividend and will reconsider its payout arrangements in the fourth quarter of 2020.

RSA was down 3.7% at midday, while Direct Line was down 7.1%. Hiscox was up 0.6%, however.

Grocer Tesco was 5.0% lower as it warned of costs as high as GBP925 million due to the Covid-19 outbreak.

In the financial year ended February 29, revenue excluding VAT climbed 1.3% to GBP64.76 billion from GBP63.91 billion. Pretax profit fell 19%, however, to GBP1.32 billion from GBP1.62 billion.

Sales costs climbed 1.6% to GBP60.2 billion and administrative expenses edged 0.7% higher to GBP2.1 billion.

Costs could rise again, Tesco cautioned, due to the Covid-19 outbreak. The grocer said it has "considered a range of scenarios" and predicted that in its financial year ending February 2021, it could incur costs between GBP650 million and GBP925 million associated with the deadly virus.

These costs are related to "significant" increases in payroll, distribution and store expenses.

Russ Mould at AJ Bell commented: "Growth is only really relevant if it is profitable and the 30% surge in sales in recent weeks may have been more of a headache than the boost it might superficially have appeared to be."

In the FTSE 250, Hyve was up 16% after the exhibitions and conference organiser said it has managed to secure banking covenant waivers.

Hyve had previously reported a "strong" first-quarter performance - for its year ending September 30 - but on Wednesday said its second quarter has been hit by the coronavirus. The lockdown measures implemented by governments around the world have seen Hyve cancel 8 of its events, postpone a further 12 to financial 2021 and delay 33 until later this financial year.

The company previously said it expects a hit of between GBP17 million to GBP19 million on revenue for its year ending September 30, translating to a GBP16 million to GBP18 million dent in profit. Hyve also said it has secured a waiver for its June covenant tests under its debt facilities. The company has access to debt facilities of GBP250 million, which it has fully drawn.

On AIM, ASOS shares surged 29% to 2,005.76 pence after undergoing a share placing worth nearly GBP250 million.

ASOS placed 15.8 million shares, equivalent to around 19% of its share capital, at 1,560p. ASOS announced plans for the placing on Tuesday and said the proceeds will go towards providing sufficient liquidity and flexibility for the company to manage through a period of continued disruption.

Also on Tuesday, the AIM-listed company reported its interim results, a day earlier than scheduled.

For the six months to the end of February, ASOS's pretax profit was GBP30.1 million, multiplying from GBP4.0 million a year before, as revenue grew by 21% to GBP1.60 billion from GBP1.31 billion. Retail sales climbed at the same rate, helped by a 20% climb in the UK alone.

ASOS added that the Covid-19 pandemic has significantly dented demand since containment measures were introduced, with group sales down by 20% to 25% in the most recent three weeks of trading.

Peer boohoo was up 8.7% at midday in a positive read-across.

The economic calendar has minutes from the US Federal Reserve's emergency rate cut meeting on March 15 due out at 1900 BST.

By Lucy Heming; lucyheming@alliancenews.com

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