(Alliance News) - Stocks in London ended mixed on Wednesday as investors continued to count the cost of the economic damage the coronavirus outbreak will inflict on the global economy.
Global trade is expected to fall by between 13% and 32% in 2020, the World Trade Organization said, as the body's chief Roberto Azevedo warned that the world was facing the "deepest economic recession or downturn of our lives."
While the deadly disease continues to sweep across the planet, there are signs that the rate of infections might be levelling out and countries are preparing to ease some lockdown restrictions.
This has instilled a semblance of optimism in markets this week, but analysts said uncertainty about how long the crisis will last and the damage it will inflict on the global economy was keeping traders on edge and hobbling any sustained rally.
The FTSE 100 index closed down 26.72 points, or 0.5%, at 5,677.73.
The FTSE 250 ended up 293.87 points, or 1.9%, at 15,62.83, and the AIM All-Share closed up 15.22 points, or 2.1%, at 727.58.
The Cboe UK 100 ended down 0.7% at 9,585.81, the Cboe UK 250 closed up 2.1% at 13,6471.25, and the Cboe Small Companies ended up 0.6% at 8,275.70.
In Paris the CAC 40 ended down 0.8%, while the DAX 30 in Frankfurt ended down 0.5%.
CMC Markets analyst Michael Hewson said: "European markets have slipped back today as investors got a flavour of the economic destruction being wrought across Europe by the virus with the Bank of France's estimate that the French economy contracted 6% in the first quarter, while the latest estimates from Germany suggest a 10% contraction in Germany's economic output in the first half of the year.
"It would appear that the size of the economic contraction, when extrapolated across the rest of 2020 has delivered a huge wake call to markets as to the eventual price tag of this crisis."
On the London Stock Exchange, insurers ended at the bottom of the blue-chip index after bowing to regulatory pressure to withdraw dividends due to the Covid-19 outbreak.
Aviva closed down 5.9% and RSA Insurance down 5.9%. Legal & General closed down 4.5%, despite defying calls from regulators to scrap payouts.
Last Thursday, the European Insurance & Occupational Pensions Authority called on insurers to "suspend all discretionary dividend distributions and share buybacks". The UK Prudential Regulation Authority also last week wrote a letter requesting that insurance companies be prudent in their approach to dividends.
Aviva said it "recognises the importance" of a cash dividend and will reconsider its payout arrangements in the fourth quarter of 2020. RSA said it intends to resume making payouts "when prudent to do so". It previously had proposed a 15.6 pence final payout for 2019.
"The cash hasn't been lost, it's just retained within the company. Nonetheless, given dividend cuts in other sectors have already knocked a sizeable chunk off the market yield, this will be very unwelcome for income investors. Choosing not to a pay a dividend will also raise questions about Aviva's own view of the current market conditions, it's not exactly a vote of confidence," said Hargreaves Lansdown analyst Nick Hyett.
Tesco closed down 1.0% after the supermarket chain warned of costs as high as GBP925 million due to the Covid-19 outbreak, but upped its annual payout to shareholders.
In the financial year ended February 29, revenue excluding VAT climbed 1.3% to GBP64.76 billion from GBP63.91 billion. The firm's 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 supermarket chain will pay a final ordinary dividend of 6.50 pence. This brings the full-year payout to 9.15p, up 59% on last year's 5.77p.
The grocer said it has "considered a range of scenarios" and predicted that it in its year ending February 2021, it could incur costs between GBP650 million and GBP925 million associated with the deadly virus.
Compounding the share price decline, Shore Capital cut the stock to Hold from Buy.
On AIM, ASOS closed up 29% after the online fashion retailer said it raised GBP247 million through a share placing as the online fashion retailer seeks to bolster finances during the coronavirus crisis.
ASOS placed 15.8 million shares, about 19% of the share capital, at 1,560 pence each.
Late Tuesday, ASOS reported strong interim results, putting automation issues at its warehouses in Berlin and Atlanta - which plagued the company last year - behind it.
For the six months to the end of February, ASOS's pretax profit was GBP30.1 million, a sharp increase from GBP4.0 million the 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.
The euro stood at USD1.0869 at the European equities close, down from USD1.0890 a day before, after eurozone finance ministers failed to agree on a coronavirus bailout package.
Eurozone finance ministers failed to agree on a fiscal rescue plan to help hard-hit member states such as Italy and Spain deal with the economic impact of Covid-19.
"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.
Societe Generale's Kit Juckes said: "It's possible to argue that Europe has plenty of mechanisms in place already to ensure that money flows to the places that need it, and what is required to fight the pandemic is that each country respond fast enough and in enough size to protect its economy during lockdown and revive if quickly afterwards.
"Which is fair enough and a reason for those who are implacably opposed to any move towards fiscal union, to resist any slippage. For all that, the impression it gives the world is that Europe is disjointed, and that will reinforce the view that the overall response will be slower and less impressive than elsewhere."
The Bank of France, meanwhile, said the nation's economy contracted 6.0% in the first quarter, putting it in recession and marking the worst performance since 1945.
The German economy, Europe's biggest, is expected to shrink by nearly 10% in the second quarter as the coronavirus brings the country to a standstill, leading research institutes warned.
"The corona pandemic will trigger a serious recession in Germany," think tanks including Ifo, DIW and RWI said in their annual spring report.
Gross domestic product likely contracted by 1.9% in the first three months of 2020, and is set to shrink by 9.8% in the second quarter as companies feel the pain from widespread shutdowns.
The pound was quoted at USD1.2390 at the London equities close, higher from USD1.2325 at the close Tuesday, on optimism over the health of UK Prime Minister Boris Johnson who is spending his third day in intensive care.
Johnson is "responding to treatment" as he remains in a stable condition in the intensive care unit where he is being treated for coronavirus, Downing Street said on Wednesday.
The prime minister continued to be in "good spirits" on Wednesday after spending his third night in St Thomas's Hospital in London, his official spokesman said.
Johnson was said to no longer be working while following the advice of doctors. He was receiving just the "standard oxygen treatment" and "breathing without any other assistance".
Against the yen, the dollar was trading at JPY108.80, down from JPY109.01 late Tuesday.
Stocks in New York were higher at the London equities close amid hopes coronavirus infections in the US could be close to peaking.
The DJIA was up 1.4%, the S&P 500 index up 1.3% and the Nasdaq Composite up 1.2%.
Investors have embraced some data showing that the growth in coronavirus cases may be leveling off in hotspots such as New York City.
Meanwhile, lawmakers in Washington are pushing ahead with additional stimulus measures, while the Federal Reserve is due later Wednesday to release minutes of an emergency meeting last month that led to its decision to cut interest rates.
Elsewhere, US Senator Bernie Sanders has suspended his presidential campaign, his team said Wednesday, clearing the way for rival Joe Biden to become the Democratic nominee to challenge Republican incumbent Donald Trump in November.
Brent oil was quoted at USD31.56 a barrel at the London equities close, down from USD33.02 at the close on Tuesday.
The US Energy Information Administration reported inventories added 15.2 million barrels over the week to April 3. This compared with a build of 13.8 million barrels for the week before and analyst expectations of a build of 10.13 million barrels.
OPEC and Russia are expected to meet via video call on Thursday to discuss output reductions.
Gold was quoted at USD1,650.50 an ounce at the close, slightly lower than USD1,655.70 late Tuesday.
The economic events calendar on Thursday has UK GDP, industrial production and trade figures at 0700 BST and US producer prices at 1330 BST.
The UK corporate calendar on Thursday has annual results from lender Secure Trust Bank and a trading statement from asset manager Man Group.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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