London’s benchmark closes lower over EU virus response

by Jonathan Adams
EU virus

The FTSE 100 closed down 0.47% at 5,677.73, while the FTSE 250 managed gains of 1.89% to 15,862.83

London’s benchmark closed lower on Wednesday, as investor consternation over the impact of the Covid-19 coronavirus pandemic continued after a meeting of EU finance ministers failed to yield an agreement on how to tackle the crisis.

The FTSE 100 closed down 0.47% at 5,677.73, while the FTSE 250 managed gains of 1.89% to 15,862.83.

Sterling was higher against both of its major trading pairs, last rising 0.67% against the dollar to $1.2415 and adding 0.81% against the euro to €1.1414, as prime minister Boris Johnson spent a second night in intensive care.

Recent optimism over the turning tide of the coronavirus [is] starting to come under pressure, said IG analyst Joshua Mahony. While many had focused on the experience of countries such as Spain and Italy, we are seeing daily deaths within the UK, US, Germany, and France continue to rise.

Mahony said “European Union dysfunctionality” was “the talk of the town”, after finance ministers failed in their bid to introduce an aid package worth half a trillion euros. This is just the latest in a list of worrying events which highlight the feeling of dissatisfaction over the EUs coronavirus response, with Italian polls showing a huge decline in support for the EU and their structures.

While claims that the EU is falling apart may be somewhat sensationalist, the squabbles seen last night were a clear reminder of just how difficult it can be to find agreement between 27 nations who have all seen vastly different experiences in recent weeks, he said. Until a resolution on this package is found, we could see stock markets continue to struggle.

Investors were also looking ahead to the release of the minutes from the Federal Reserve’s emergency meeting on 15 March, which were due at 1900 BST.

In corporate news, Tesco slipped 0.58% after it posted an 18.7% decline in full-year pre-tax profit, but increased its final dividend as it estimated that the cost to recruit thousands of extra staff to cope with demand and employees taking time off because of the coronavirus would be between £650m and £925m.

Insurers were under the cosh, with Direct Line down 7.93%, RSA off 5.48% and Aviva 9.52% lower after they suspended their dividends due to the pandemic, and following pressure from the Bank of England.

Legal & General, which confirmed last week that it will pay a 2019 dividend, was 3.76% weaker.

In theory the insurance sector shouldn’t be subject to the same erosion of revenue seen in other sectors, said Russ Mould, investment director at AJ Bell. Premiums should continue to flow as people will still have to insure their cars, homes, businesses and lives through the coronavirus crisis.

Mould said the level of claims that would come through was hard to quantify at the moment.

It would not be a good look for the industry to be taking a very hard line with its customers while continuing to pay out millions to its shareholders, he said.

On the upside, exhibitions and conference company Hyve surged 24.43% after saying it was pulling its dividend due to the Covid-19 outbreak as more than a quarter of its workforce had been put on furlough, with the leadership team taking a pay cut.

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