LONDON MARKET OPEN: Coronavirus Fears And Centrica Weigh On FTSE 100

(Alliance News) - London stocks slumped at the open on Thursday as China reported a surge in new coronavirus cases due to a new counting method, reigniting fears over the spread of the virus.

Weighing on the FTSE 100 were Centrica, which swung to a full-year loss, and Barclays, which posted a rise in 2019 profit and said it continues to back its chief executive amid a probe into his relationship with the late Jeffery Epstein.

The FTSE 100 index was down 68.18 points, or 0.9%, at 7,466.19 early Thursday. The mid-cap FTSE 250 index was down 57.84 points, or 0.3%, at 21,735.64. The AIM All-Share index was down 0.3% at 966.69.

The Cboe UK 100 index was down 1.0% at 12,631.90. The Cboe 250 was down 0.1% at 19,613.53, and the Cboe Small Companies down 0.5% at 12,426.05.

In mainland Europe, the CAC 40 in Paris was down 0.5% while the DAX 30 in Frankfurt was 0.4% lower early Thursday.

Another 14,840 people were confirmed to be infected with the virus in China, with the new cases and deaths by far the biggest one-day increases since the crisis began.

The new tally raised the death toll to 1,355 and the total number of nationwide infections of the virus – officially named COVID-19 – to nearly 60,000. In Hubei, where tens of millions of people are trapped as part of an unprecedented quarantine effort, 242 new deaths were reported on Thursday.

Hubei authorities said the huge increases were because they had broadened their definition for cases to include people "clinically diagnosed" via lung imaging. The commission said it looked into past suspected cases and revised their diagnoses, suggesting that older cases were included in Thursday's numbers.

Two top-ranking politicians overseeing the epicentre of the outbreak also were sacked, adding to questions over China's handling of the crisis, just hours after President Xi Jinping claimed "positive results" in battling the outbreak.

On Thursday, the mood in markets had been calmer as the number of new cases in Hubei had fallen for two straight days.

"The surge in the infection rate has made investors cautious, and they continue to mull over the implication of this surge in the infection rate," said Naeem Aslam, chief market analyst at AvaTrade.

"This has happened when investors were feeling comfortable with the idea that the central banks around the globe have sufficient tools to tackle this issue, and more importantly, they were celebrating the news that the infection rate over in China has come under control," said Aslam. "But today’s development has shaken that confidence."

In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite ended down 0.7%, while the Hang Seng index in Hong Kong is 0.3% lower in late trade.

Safe haven investments, such as gold and the Japanese yen, were higher early Thursday.

Gold was quoted at USD1,574.65 an ounce early Thursday, up from USD1,566.10 on Wednesday. Against the yen, the dollar was quoted at JPY109.74, down from JPY110.00.

Sterling was quoted at USD1.2978 early Thursday, flat on USD1.2975 at the London equities close on Wednesday. The euro traded at USD1.0881 early Thursday, lower than USD1.0894 late Wednesday.

Brent oil was trading at USD55.44 a barrel early Thursday, soft on USD55.55 late Wednesday.

Centrica was at the bottom of the FTSE 100 in early trade, down 15% after a swing to loss and warning on its Upstream unit in 2020.

Revenue fell to GBP22.67 billion from GBP23.30 billion in 2018, as the company sank to a pretax loss of GBP1.10 billion from a GBP575 million profit the year before.

The firm said it took a net exceptional charge before tax of GBP1.10 billion, including impairments of E&P and Nuclear assets, predominantly due to a reduction in commodity price forecasts, and restructuring costs of GBP356 million.

"2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices. Against this backdrop Centrica delivered growth in customer accounts, higher net promoter scores, significant cost efficiencies in excess of our target," said Chief Executive Ian Conn.

"Looking to 2020, we expect to deliver earnings momentum relative to 2019 from our core customer divisions, but Upstream earnings are likely to be impacted by the lower commodity price environment," Conn added. "However, with our continued focus on financial discipline we expect 2020 sources and uses of cash flow to remain broadly balanced."

Barclays shares dipped 1.9% as the lender said profit rose by a quarter in 2019 but warned hitting its return on tangible equity target has become more challenging.

Total income rose 2% to GBP21.63 billion, with net operating income broadly flat at GBP19.72 billion. Total operating expenses fell 5% to GBP15.43 billion, helped as litigation & conduct costs were reduced by 16% to GBP1.85 billion.

As a result, pretax profit rose 25% to GBP4.36 billion.

The bank's common equity tier 1 ratio strengthened to 13.8% in 2019 from 13.2% in 2018. Return on tangible equity improved year-on-year to 9.0% versus 8.5% in 2018. Barclays said it continues to target a RoTE above 10%.

"However, given global macroeconomic uncertainty and the current low interest rate environment, it has become more challenging to achieve this in 2020. Notwithstanding these headwinds, the group believes it can achieve a meaningful improvement in returns in 2020," the bank said of its RoTE target.

Barclays separately said Chief Executive James Staley is being unanimously recommended for re-election at the bank's annual general meeting, having been judged to have been "sufficiently transparent" about the nature of his relationship with Jeffrey Epstein.

US financier Epstein killed himself in a New York jail in August while awaiting trial on sex-trafficking charges.

The board will continue to "cooperate fully" with an investigation from Financial Conduct Authority and Prudential Regulation Authority, it said. The probe is into "Staley's characterisation to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company's response to the FCA".

Coca-Cola HBC was the top performer among the blue-chips, up 3.1% after the soft-drinks bottler reported full-year forex-neutral revenue growth of 4.4%, with growth in the fourth quarter alone 7.4%.

Comparable earnings before interest and tax were up 12% to EUR758.7 million, a record high, the company said.

"I am particularly pleased with how we finished the year, following the unseasonable weather we faced in Q2 and Q3...We enter 2020 with considerable momentum and exciting plans that include the roll-out of Costa Coffee in at least 10 of our markets. We are confident that we are well on track to deliver our 2020 commitments and to make solid progress on our 2025 growth agenda," said Chief Executive Zoran Bogdanovic.

In the FTSE 250, Domino's Pizza Group was up 2.3% after agreeing to sell its Norwegian business to Pizza Holding and EYJA Fjarfestingafelag III, the existing minority shareholders in Domino's Norway.

Domino's Pizza will sell its 71% stake for consideration comprised of a nominal payment of NOK1 in cash and the transfer of the minority shareholders' interest in Domino's Sweden, which will result in Domino's Pizza owning 100% of the Swedish operations.

This transfer should facilitate an "an orderly exit" from the Swedish operations in due course, said Domino's Pizza, and "simplify" the disposal of the business.

In the event that shareholder approval for the deal is not obtained at an early May general meeting, Domino's Pizza will pay the minority shareholders a GBP1 million break fee. It said the deal had the back of brand owner Domino's Pizza in the US and of the full board of the UK company.

Domino's Norway made an underlying operating pretax loss of GBP6.6 million in 2018.

By Lucy Heming; lucyheming@alliancenews.com

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