Global equities react badly to accelerating spread of deadly coronavirus

28 January 2020

Global equities react badly to accelerating spread of deadly coronavirus

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Market news

The FTSE 100 suffered its worst day since October yesterday, falling 2.3% as concern grew regarding the spread of the deadly coronavirus. US, Asian and continental European markets also suffered as cases of the virus, which originated in China, were confirmed in an increasing number of countries around the world. Officially, there have been over 100 fatalities and a few thousand confirmed infections. Fears that the incubation period is longer than expected, however, have led to predictions that as many as 100,000 people are already infected. 

Markets fear the consequences that the outbreak could have on the global economy, which has been slowing and relies on China for a significant portion of aggregate GDP growth. 56m people are already affected by a travel lockdown in China, which has also extended the Lunar New Year holiday. 

Wall Street was also under pressure from expectations that the Federal Reserve will not bring forward an expected rate cut at its meeting that starts today. Yesterday, the National Association for Business Economics' released data from a fourth-quarter survey that suggested the US labour market has peaked. 

With a US general election later this year, recent polls showed that Joe Biden and Bernie Sanders are leading the field of Democratic candidates, whilst new evidence was heard at President Trump's impeachment inquiry that suggested Trump tried to delay US military aid to Ukraine until its government agreed to investigate Biden. 

Meanwhile, the US Treasury Secretary has expressed hopes that a new trade deal with the UK can be reached by the end of the year. Britain is lined up to leave the EU at 11pm this Friday. Trade talks will not officially start until after the European governments agree a negotiating mandate next month, but this week Downing Street has rejected Brussels' proposal that the European Court of Justice can rule on any post-Brexit agreement. 

 

Stock focus

The rescue of Flybe by the UK government has been thrown in doubt, with it emerging that the stricken airline will ask officials for a £100m loan on top of the deferred £106m tax bill. The deal has also been complicated by Flybe's mortgaging of major assets last year to existing investors. Meanwhile, Ryanair's chief executive, Michael O'Leary, has threatened to sue the government if it rescued Flybe. 

Boris Johnson's government has approved the use of Huawei technology to develop the UK's 5G telecoms network, defying the wishes of Washington. The decision was unanimous and followed a meeting of the National Security Council, with caveats that Huawei's market share will be limited to 35% and its equipment will be excluded from the sensitive network “core”. 

ASOS enjoyed revenue growth of 20% in the final four months of 2019, with consistent performance across all of its divisions. The online retailer said that record Black Friday sales were a key contributor, following a theme that has seen Black Friday become more important to retailers' success over the festive period. Total sales hit £1.1bn. 

The pub group Marston's was also able to update investors on a “strong” Christmas. Despite a sluggish start to December, sales grew 4.5% during the holiday period. It added that cost management was largely on course, but that a 6.2% rise in the minimum wage, however, would likely cost between £2-3m. 

Finally, Sainsbury's has pledged to invest £1bn to reduce net greenhouse gas emissions to neutral over the next 20 years. It has also promised to halve its use of plastic packaging by 2025 and improve its healthy eating initiatives. Chief executive Mike Coupe added: “we must recognise that living well now also means living sustainably”.

 

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Important information

This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.

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Global equities react badly to accelerating spread of deadly coronavirus

Important note

No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.

Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.


Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.