FTSE 100 opens in the red; AZ and RBS lead the fallers

FTSE 100 opens in the red; AZ and RBS lead the fallers

The FTSE 100 took its cue from Wall Street as it opened in the red amid continuing worries over the coronavirus outbreak.

An early corporate victim of the flu-like illness, which has claimed more than 1,300 lives, was revealed as AstraZeneca (LON:AZN), which is counts China as one of its main markets.

The shares fell 3.5% in early deals as its fourth-quarter earnings undershot expectations and it warned of the impact of the epidemic.

Royal Bank of Scotland (LON:RBS) wasn’t far behind as the tenure of new boss, Alison Rose, started with a whimper rather than a bang. It’s latest trading statement prompted a 3.5% fall in the stock.

“Every rose has its thorn; scratch beneath every RBS quarterly update and you’ll find a sting or two,” said Neil Wilson of Markets.com.

Staging what can best be described as a ‘dead cat bounce’, was Centrica (LON:CNA), up 1.5%, which led the risers after having the bejesus knocked out of it on Thursday after a rather depressing update on trading.

6.37am: Indecisive start predicted 

London equities are set to make an indecisive start, with sterling stabilising after yesterday’s sharp rise following the resignation of the chancellor of the exchequer.

Spread betting quotes indicate that the FTSE 100 will open 3 points higher at 7,455.

“Are markets falling out of love with stocks?” wonders Edward Moya at Oanda.

“Fridays in 2020 have not been the best for stocks and we could see investors fall out of love of their bullish bets as everyone waits to have a clearer picture with the spreading of the coronavirus.

“On the second day of the new methodology of confirming new cases, which includes imaging scans, Hubei reported 4,283 new cases, down from yesterday’s shocking jump of 14,840 cases which included prior days and weeks of cases. China reported the total number of cases has reached 63,851 and that the death toll rose by 121 to 1,380,” Moya noted.

US stocks closed lower yesterday after the Federal Reserve said it would scale back the support it is providing the overnight lending markets.

As from today, the cap on the central bank’s repurchase agreements will be cut to US$100bn from US$120bn.

The Dow Jones clattered 128 points lower to close at 29,423 and the S&P 500 fell 5.5 points to finish at 3,374.

In Asian markets this morning, Japan’s Nikkei is down 166 points at 23,662 but Hong Kong’s Hang Seng index is 115 points to the good.

A Rose for Valentine’s Day

On the corporate scene in the UK, the focus will be on updates from two big guns: AstraZeneca PLC (LON:AZN) and Royal Bank of Scotland Group PLC (LON:RBS).

AstraZeneca should meet the upper end of its guidance, said analysts at Deutsche Bank, reckoning management are likely to guide to high single to low double-digit product sales growth at constant exchange rates for 2020, with core earnings per share (EPS) of US$4.00-4.20, implying 10-20% growth.

The dividend is expected to remain unchanged from 2018 at US$2.80 for both 2019 and 2020.

Royal Bank of Scotland’s results will be the first to be delivered by the lender’s new chief executive Alison Rose and fortunately for headline writers, they have fallen on Valentine’s Day.

Rose will let the market know whether the disappointing third-quarter before she took over was a glitch or a trend, following a strong performance in the first half of the year.

The third quarter saw the 62.4% taxpayer-owned bank set aside an additional charge of £900mln, while both net interest income and net interest margin (NIM) both contracted, while the bank’s cost:income ratio spiked to 93%.

Analysts have recently warned that forecast that RBS’s returns will “fade” due to pressure on NIM and other factors, that its long-awaited dividends will be slow to arrive and there is potential for major Brexit downside.

Rose could announce capital returns of “circa 30% of market cap” for 2020-2022, albeit the Barclays analysts said they expected the timing to be “back-end-loaded” as well as being contingent on external factors such as the propensity for the UK government’s investments arm UKGI to sell down its stake.

On the macro side, US retail sales figures for January will be important, Danske Bank said, “as US private consumption growth has slowed recently (the Fed now says ‘moderate’ consumption growth in its statement, from ‘strong’ growth previously) and the question is whether this is just due to noisy data or more persistent factors”.

“The US manufacturing production data for January also due is not that interesting, as it will not yet capture the impact of the coronavirus,” the Danish bank added.

Significant announcements expected:

Finals: AstraZeneca PLC (LON:AZN), Royal Bank of Scotland Group PLC (LON:RBS)


Economic data: China industrial production, China retail sales, EU GDP, US retail sales, US industrial production, US consumer sentiment

Around the markets

  • Sterling: US$1.3047, up 0.05 cents
  • 10-year gilt: yielding 0.674%, up 3.98 basis points
  • Gold: US$1,578.20 an ounce, down 60 cents
  • Brent crude: US$56.40 a barrel, up 6 cents
  • Bitcoin: US$10,159, down US$23

Business headlines

Financial Times

Sajid Javid lost a brutal power struggle with Boris Johnson and resigned as chancellor of the exchequer

Electric vehicles maker Tesla is to take advantage of its stratospheric share pruce by tapping the market for up to US$2.3bn.

UK regulators are investigating the links between Barclays chief executive Jes Staley and disgraced financier Jeffrey Epstein after receiving a batch of JP Morgan emails.

The Times

JCB, one of Britain’s largest manufacturers, is curbing production at its factories in a bid to see off significant supply shortages triggered by the coronavirus outbreak.

Coca-Cola Hellenic Bottling Company boosted profits by 12% last year helped by expansion in key markets including Russia and Nigeria.

Dutch food delivery giant Takeaway.com has swung into the black as it prepares to take full control of Britain’s Just Eat.

Loss-making budget airline Norwegian Air has said it is “unrealistic” to expect the delivery of the Boeing 737 Max aircraft it has ordered this year.

Sir Anthony Habgood, the chairman of Relx, is stepping down after helping to quadruple the value of the business information and analytics group in the past decade.

As many as five water companies are taking Ofwat to the competition watchdog over demands to reduce household bills.

The Daily Telegraph

Centrica registered a £1.1 billion annual loss that sunk its share price, blaming a “challenging environment”, singling out the energy price cap and falling natural gas prices.

The eurozone economy is showing few signs of the much hoped-for recovery as the industrial slump continues to crush growth and Germany remains “particularly exposed” to a coronavirus crunch in China.

The Pentagon has been forced to suspend work on a multi-billion dollar military contract awarded to Microsoft after a legal challenge from Amazon.

The US government has broadened its legal case against Huawei, combining individual charges of fraud, intellectual property theft and obstruction of justice.

The Guardian

The pound hit a new two-month high against the euro as news of Sajid Javid’s resignation and Rishi Sunak’s promotion was announced.

Shares in gambling companies have plunged in value by hundreds of millions of pounds after the industry regulator said it would consider slashing the maximum allowable stake on online casino games to £2.

Nissan slumped to its first quarterly loss since 2010 as weak sales added to the woes faced by the automotive manufacturer including Carlos Ghosn civil actions.

Marks & Spencer is closing two of its clothing distribution centres in a move that puts almost 700 jobs at risk.

Airbus has slumped to a €1.4 billion annual loss after receiving record fines for bribery, but raised its dividend as aircraft deliveries hit an all-time high.

Daily Mail

Tidjane Thiam, the Credit Suisse boss ousted after a spying scandal, revealed profits soared 69% to £2.7 billion last year – the most it had generated since 2010.

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