LONDON MARKET OPEN: Stocks Sell Off As Covid-19 Lockdown Fears Grow

(Alliance News) - Stock prices opened sharply lower on Wednesday as fears over tighter coronavirus restrictions in the UK and Europe and the damage this would do to struggling economies spooked investors.

German Chancellor Angela Merkel is expected to push for lockdown measures in crisis talks with the country's regional leaders Wednesday. The proposed new restrictions include closing restaurants and bars and putting strict limits on private and public gatherings while keeping schools, daycares and shops open, according to the Bild daily.

Media reports in France said President Emmanuel Macron may extend the hours of an existing curfew, with possibly a full lockdown on weekends, or order targeted lockdowns in the hardest-hit regions.

Meanwhile, UK Prime Minister Boris Johnson is under growing pressure to impose heightened coronavirus restrictions as the UK recorded its highest daily Covid-19 death toll since May.

As total deaths involving the virus reach 61,000 across the UK, Downing Street did not deny a projection provided by government scientists which suggested the toll could remain high throughout the winter and result in more fatalities than in the spring.

In London early Wednesday, the FTSE 100 index was down 86.51 points, or 1.5%, at 5,642.48. The FTSE 250 was down 209.81 points, or 1.2%, at 17,377.90. The AIM All-Share was 0.4% lower at 968.69.

The Cboe UK 100 was down 1.7% at 560.68. The Cboe 250 was down 1.3% at 14,669.56. The Cboe Small Companies was flat at 9,661.09.

In Paris the CAC 40 was down 2.6%, while the DAX 30 in Frankfurt was down 2.3%.

"It is becoming increasingly apparent that rising infection rates across Europe are now translating into a rise in hospitalisations, as well as a rising death count, with both the UK and France posting their highest fatality levels since May, as the second coronavirus wave continued to spread across Europe," said CMC Markets analyst Michael Hewson.

"When equity markets dropped sharply back in February, governments in Europe, the US and here in the UK stepped up with massive fiscal support, acting in conjunction with central banks to support their economies. This in turn prompted a strong rebound in equity markets as confidence that politicians would support businesses through what was likely to be a very tough period, helped fuel a rebound in sentiment. It is not immediately apparent that this fiscal support will be as significant at the second time of asking, hence the sharp slides we are now seeing in equity markets," Hewson added.

The Japanese Nikkei 225 index closed down 0.3%. In China, the Shanghai Composite ended up 0.5%, while the Hang Seng index in Hong Kong closed down 0.3%.

In the FTSE 100, Next was one of a few companies to open in the green, up 0.3%, after the clothing and homewares retailer raised its annual profit guidance after a strong third-quarter performance.

Next said full-price sales in the third quarter were better than it had anticipated and were up 2.8% against the same time last year. Total sales, including markdown sales, were up 1.4%.

The retailer said sales performance by product category remains "very similar to the second quarter", with Home and Childrenswear over-performing while demand for men's and women's formal and occasion clothing remains weak. Further, Next said online sales remain strong, both in the UK and overseas.

As such, Next forecasts annual pretax profit to come in at GBP365 million, higher than the GBP300 million guided with its interim results in September. In financial 2020, Next posted pretax profit of GBP748.5 million.

DCC was up 0.3% after RBC Capital raised the Irish support services firm to Outperform from Sector Perform.

At the other end of the large caps, property companies British Land and Land Securities were down 6.7% and 5.0% respectively amid fears that a second UK lockdown would further dent real estate values.

In the FTSE 250, Aston Martin Lagonda was the best performer, up 14% at 62.40 pence after the luxury carmaker confirmed taking in GBP125 million from its capital raise, issuing 250 million shares at 50p each.

The luxury carmaker late Tuesday unveiled plans for a bumper fundraising and an expanded technical pact with trade investor Mercedes-AMG.

The pound was quoted at USD1.3002 on Wednesday morning, down from USD1.3067 at the London equities close Tuesday.

The euro stood at USD1.1764, down sharply from USD1.1830. Against the safe-haven yen, the dollar was trading at JPY104.21, down from JPY104.43.

Brent oil was quoted at USD40.57 a barrel Wednesday morning, lower from USD41.20 at the London equities close Tuesday. Gold was quoted at USD1,909.42 an ounce, up from USD1,908.04.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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