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LONDON MARKET OPEN: Stocks Mixed As Coronavirus Fears Ebb; RBS Sinks

Fri, 14th Feb 2020 08:48

(Alliance News) - Stock prices in London were lacking direction on Friday morning, after World Health Organization calmed market concerns by saying the recent increase in coronavirus cases was caused by changes in diagnosis methodology, rather than a worsening of the crisis.

The FTSE 100 index was down 27.97 points, or 0.4%, at 7,424.06, hurt by a decline for major constituent RBS. Since the week began, the index is down 0.6%.

However, mid-cap FTSE 250 index was up 55.65, or 0.3%, at 21,729.55. The AIM All-Share index was flat at 965.97.

The Cboe UK 100 index was 0.1% lower at 12,580.57. The Cboe 250 was up 0.2% at 19,594.31, and the Cboe Small Companies flat at 12,453.49.

In mainland Europe, the CAC 40 in Paris was down 0.2% while the DAX 30 in Frankfurt was flat.

The pound was quoted at USD1.3047 early Friday, broadly flat from USD1.3045 at the London equities close Thursday. The euro was quoted at USD1.0836 early Friday, soft from USD1.0850 late Thursday.

Against the yen, the dollar was trading at JPY109.78, broadly flat from JPY109.80 late Thursday.

The economic events calendar on Friday has GDP readings from the eurozone at 1000 GMT. In the afternoon, there are US retail sales figures at 1330 GMT.

The Japanese Nikkei 225 index closed down 0.6%, but the Shanghai Composite closed up 0.4% and the Hang Seng index in Hong Kong closed up 0.3%.

"Investors relaxed after the World Health Organization warned that the spike in number of cases, which was due to the change in diagnosis methodology, didn't necessarily reflect a sudden deterioration in the situation," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

The revision added nearly 15,000 patients to Hubei's count in a single day, with officials explaining that past cases were included. The first cases emerged in December in Wuhan, Hubei's capital.

The WHO said the numbers included cases going back weeks.

The sharp one-day increase "does not represent a significant change in the trajectory of the outbreak," said Michael Ryan, head of WHO's health emergencies programme.

The move will ensure patients get treated as early as possible, instead of having to wait for laboratory tests, health officials said.

"There have been some backlogs in testing and this is also going to help in ensuring that people get adequate care," Ryan said.

On Friday, Hubei's health commission said another 116 people had died and more than 4,800 new cases were reported. Of those cases, more than 3,000 were "clinically diagnosed".

In UK domestic news, Prime Minister Boris Johnson will chair the first meeting of his new-look Cabinet after a dramatic reshuffle which saw Sajid Javid quit as chancellor.

Several senior heads rolled as Johnson recast his top ministerial team on Thursday – with Javid ordered to fire his closest aides and replace them with advisers chosen by Number 10.

The former chancellor chose to quit instead and was replaced by his former deputy at the Treasury, Rishi Sunak, in the biggest shock of Johnson's shake-up.

Javid accused the PM of setting conditions "any self-respecting minister" would reject – seen as a thinly veiled swipe at his successor.

On the London Stock Exchange, Royal Bank of Scotland Group was the worst performer in the blue-chip index, down 6.4%, despite profit and net interest income beating expectations in 2019,

The bank said it plans to rename the parent company as NatWest Group. Already its investment bank is called NatWest Markets.

The lender did not offer any further details on the name change, only that it will happen "later this year".

RBS said it expects 2020 to "challenge" its ability to generate income, with its own economic forecasts predicting a UK base rate cut in the short term.

In 2019, the state-backed lender's operating pretax profit increased 26% to GBP4.23 billion from GBP3.36 billion in 2018. Operating pretax profit, according to company-compiled consensus, was forecast at GBP3.77 billion

The bank's attributable profit for 2019 came in at GBP3.13 billion, compared to consensus of GBP2.52 billion. In 2017, when RBS reported its second profit in a decade, the figure was GBP1.62 million.

Net interest income for 2019 was down 7.0% year on year at GBP8.05 billion from GBP8.66 billion, but outperformed against GBP8.02 billion consensus.

Total income was GBP14.25 billion, compared to 2018's GBP13.40 billion and the market expectation of GBP13.66 billion.

AstraZeneca started the day 3.4% lower. The drugmaker posted a reduced annual profit due to higher costs and said the coronavirus outbreak was likely to hurt its 2020 performance.

Astra posted a USD1.55 billion pretax profit for 2019, down 22% from USD1.99 billion the year before. Meanwhile, revenue rose 10% to USD24.38 billion from USD22.09 billion, just below consensus of USD24.40 billion.

Profit was hurt by a 16% rise in selling, general and administrative costs to USD11.68 billion from USD10.03 billion, as well as a 39% reduction in gains on other operating income and expense to USD1.54 billion from USD2.53 billion.

In 2020, Astra is guiding for "a high single-digit to a low double-digit percentage" rise in total revenue, and "a mid- to high-teens percentage" increase in core EPS at constant currency.

Core earnings per share rose 1.2% to USD3.50, up from USD3.46, coming in below consensus of USD3.57 and sitting at the bottom of Astra's guidance for core EPS of between USD3.50 and USD3.70 at constant currency.

"All guidance assumes an unfavourable impact from China lasting up to a few months as a result of the recent novel coronavirus outbreak. The company will monitor closely the development of the epidemic and anticipates providing an update at the time of the first quarter of 2020 results," said Astra.

RELX was down 0.7% in early trade after Berenberg cut the business analytics and publishing company to Hold from Buy.

SEGRO was among the best performers in the blue-chip index, up 1.7%, after saying that 2019 was another year of "strong" financial and operational performance, supported by rental growth and additional income generated from its development pipeline.

The real estate investment trust upped its dividend payment for the year and added that it has made strong start to 2020 due to continuation of the earnings momentum.

For 2019, SEGRO recorded pretax profit of GBP902.0 million, down 18% from GBP1.09 billion in 2018, mainly due to lower realised and unrealised gains in its wholly-owned portfolio.

Adjusted pretax profit, however, jumped 11% to GBPP267.5 million from GBP241.5 million due to a record year of development completions, high customer retention rates, like-for-like rental growth and a low vacancy rate.

SEGRO raised its final payout for 2019 by 8.7% to 14.4p, giving a total payout of 20.7p, up 10%.

Gold was quoted at USD1.576.10 an ounce early Friday, higher than USD1,574.60 late Thursday.

"Gold consolidated between the USD1570 and USD1580 range as investors preferred keeping a foot in the precious metal to stay hedged against the risk of a further market sell-off due to the coronavirus up-and-downs," said Ozkardeskaya.

Brent oil quoted at USD56.46 a barrel early Friday, firm from USD56.30 late Thursday.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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