London midday: Stocks fall further as pound firms after jobs data
London stocks had fallen further into the red by midday on Tuesday, dragged lower by worries about the spread of coronavirus in China and a stronger pound, as solid UK jobs data weakened the case for a rate cut by the Bank of England.
The FTSE 100 was down 1.2% at 7,560.58 as concerns about the coronavirus weighed on risk appetite after China confirmed that it can spread between humans. Adding to the downbeat mood was Moody’s downgrade of Hong Kong’s credit rating to Aa2 from Aa3. The ratings agency also cut its outlook on HK to 'negative' from 'stable' following months of pro-democracy protests.
Spreadex analyst Connor Campbell said: "At the end of last week it seemed like a lot of the market’s major concerns had been cleared from the table, leaving investors searching for the next headline story to drive trading. It appears that they’ve found a contender in the coronavirus in China.
"An increase in the number of cases of the virus to 200-plus people is itself alarming. More so is the fact the virus - which causes a type of pneumonia and can be passed person-to-person - has started to spread beyond Wuhan, where most of the cases are located. The illness has now been detected in Beijing, Shanghai and Shenzhen, alongside abroad in Japan, Thailand and South Korea."
A firmer pound also dented the top-flight index, as around 70% of its constituents derive most of their earnings form overseas. Sterling was up 0.4% against the dollar at 1.3055 and 0.2% higher versus the euro at 1.1751 after data from the Office for National Statistics showed that the employment rate hit another fresh high in the three months to November.
The employment rate was 76.3%, a forecast-beating 0.6% improvement on the same period a year earlier and 0.5% higher than the previous quarter. It was the highest since records began in 1971. Unemployment held steady at 3.8%.
The data on wage growth was less impressive, however. Estimated annual growth in average weekly earnings remained at 3.2% for total pay, which includes bonuses, and slowed to 3.4% from 3.5% for regular pay, which excludes one-off payments. Once adjusted for inflation, annual growth in total pay was estimated to be 1.6%, and 1.8% for regular pay.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The continued resilience of the labour market increases the chances that the MPC will take a rain-check next week, instead of cutting Bank Rate immediately.
"The outlook for strong wage gains makes it hard for the MPC to justify cutting Bank Rate now in order to meet its primary objective of ensuring that CPI inflation remains close to its 2% target."
In equity markets, Russian steel maker Evraz was the standout loser, while miners Antofagasta, Rio Tinto, Glencore, BHP and Anglo American all fell amid worries about China.
Burberry was under the cosh, along with the wider European luxury sector, amid fears about the impact of coronavirus. Burberry’s third-quarter trading update is due on Wednesday.
Neil Wilson, chief market analyst at Markets.com, said: "It’s all about concerns that this virus will hit growth in China and could spread to Hong Kong. Investors worry about Chinese consumer confidence being hit - if we’re talking a SARS-like event then it will keep shoppers in their homes and away from stores. And that is not even considering the impact on tourism, which particularly in the case of HK would be a factor weighing on luxury sales."
Online trading platform IG Group lost ground as it reiterated its medium-term financial targets but posted a drop in interim trading revenue and profit and announced the departure of its chief financial officer.
On the upside, easyJet flew higher as the budget airline bumped up its first-half revenue guidance and said it expects a narrower first-half headline pre-tax loss compared with 2019's £275m.
Dixons Carphone was a high riser as it reported a mixed performance over the festive period, with a rise in electricals revenue but a drop in mobile sales, and said it was on course to deliver on its full-year expectations.
SSP was also up after it reported a 7.5% rise in first-quarter revenue at constant currency and said it was confident of delivering another year of "strong growth".
FTSE 100 - Risers
easyJet (EZJ) 1,513.00p 4.34%
Melrose Industries (MRO) 245.00p 2.98%
Legal & General Group (LGEN) 305.80p 1.19%
Hargreaves Lansdown (HL.) 1,794.00p 0.96%
Kingfisher (KGF) 213.60p 0.75%
Auto Trader Group (AUTO) 587.40p 0.65%
Royal Bank of Scotland Group (RBS) 223.80p 0.49%
Lloyds Banking Group (LLOY) 58.17p 0.47%
Berkeley Group Holdings (The) (BKG) 5,164.00p 0.43%
Ashtead Group (AHT) 2,535.00p 0.32%
FTSE 100 - Fallers
Evraz (EVR) 396.30p -7.02%
International Consolidated Airlines Group SA (CDI) (IAG) 630.80p -4.02%
Burberry Group (BRBY) 2,203.00p -3.25%
Informa (INF) 830.20p -3.17%
Antofagasta (ANTO) 945.60p -3.13%
InterContinental Hotels Group (IHG) 4,993.50p -2.96%
Glencore (GLEN) 234.90p -2.85%
Rio Tinto (RIO) 4,545.50p -2.81%
Anglo American (AAL) 2,187.00p -2.39%
Pearson (PSON) 574.80p -2.34%
FTSE 250 - Risers
Dixons Carphone (DC.) 149.05p 4.63%
SSP Group (SSPG) 684.00p 3.01%
Airtel Africa (AAF) 71.45p 2.07%
Pollen Street Secured Lending (PSSL) 838.00p 1.21%
Frasers Group (FRAS) 516.50p 1.08%
IG Group Holdings (IGG) 692.40p 0.99%
Softcat (SCT) 1,251.00p 0.97%
BMO Commercial Property Trust Limited (BCPT) 113.80p 0.71%
BMO Global Smaller Companies (BGSC) 148.90p 0.68%
Plus500 Ltd (DI) (PLUS) 925.20p 0.67%
FTSE 250 - Fallers
Kaz Minerals (KAZ) 528.40p -4.76%
Vesuvius (VSVS) 455.60p -3.02%
RHI Magnesita N.V. (DI) (RHIM) 3,592.00p -2.97%
Fidelity China Special Situations (FCSS) 245.50p -2.96%
PureTech Health (PRTC) 287.00p -2.71%
Wood Group (John) (WG.) 393.80p -2.52%
Cranswick (CWK) 3,484.00p -2.52%
Mediclinic International (MDC) 395.20p -2.03%
GVC Holdings (GVC) 893.00p -2.02%
Barr (A.G.) (BAG) 540.00p -2.00%