London midday: Stocks in the red as virus fears weigh

London stocks were still weaker by midday on Thursday as optimism over a potential Covid-19 vaccine was replaced by worries about rising cases, tightening restrictions and their impact on the economy.

The FTSE 100 was down 0.9% at 6,325.83.

IG said: "Virus fears have hit an overextended global stock market this morning, knocking European equities sharply lower and pointing towards a weaker start in the US. After the soar-away gains of the past two weeks, equities now look much more richly-valued, and thus vulnerable to an outbreak of bad news.

"This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread. Even reports of success for AstraZeneca’s new vaccine were not enough, the impact of these vaccine announcements having been on a declining trend since the first, excitedly-received news from Pfizer almost three weeks ago.

"There appears to be little desire to chase equities at these levels, and perhaps rightly so, with markets looking priced for perfection and still vulnerable to some short-term turbulence."

Investors were digesting the latest survey from the Confederation of British Industry, which showed that UK factory orders fell at a faster pace in November as the second wave of Covid-19 hit demand.

The CBI's monthly manufacturing order book balance dropped to -40 from October's seven-month high of -34 though output volumes showed their strongest reading for more than a year.

The orders were slightly worse than a reading of -40 forecast in a Reuters poll of economists. Total and export order books both weakened and were well below their long-run averages.

The survey showed demand for manufactured goods falling as businesses responded to a new series of Covid-19 restrictions in the UK and other countries while factory activity continued to feel the benefit of orders placed since the first lockdowns ended.

The CBI's deputy chief economist Anna Leach said: "Output volumes have declined at their slowest pace in over a year in our November survey. But order books have softened again as global demand has been hit by intensified lockdowns, and manufacturers have trimmed their expectations."

On the corporate front, B&Q owner Kingfisher fell even as it reported a strong rise in third quarter sales as consumers spent the coronavirus lockdown improving their homes.

Richard Hunter, head of markets at Interactive Investor, noted that over the last year, the outperformance of the share price has been significant, with a rise of 43% compared to a decline of 13% for the wider FTSE 100.

"Quite apart from the challenges which may be yet to come, the strong performance has led to the question of whether the shares are now up with events, as evidenced by some initial profit taking in early trade, such that the market consensus of the shares remains at a hold," he said.

Speciality chemicals company Johnson Matthey moved lower after it reported a slump in first-half pre-tax profit as the coronavirus pandemic dented demand but said it expects a "materially stronger" second half.

Discount retailer B&M European Value Retail slid as its stock went ex-dividend.

Cineworld shares tanked following a report the cinema chain is considering a company voluntary arrangement to help it stay afloat until the Spring.

On the upside, Morrisons rallied after an upgrade to ‘buy’ at Goldman Sachs.

Halma was in the black after the safety equipment maker revised its full-year profit forecasts and lifted its interim dividend as order intake in the second half increased year-on-year.

Outsourcer Serco was also a high riser after an article in The Times suggested it has attracted interest from at least two private equity firms that are quietly running the numbers with advice from investment banks.

Royal Mail gained despite saying it swung to a loss in the first half as redundancy and Covid-19 costs more than offset higher revenue from booming parcel deliveries. The FTSE 250 group swung to a £20m operating loss in the six months to the end of September from a £61m profit a year earlier as revenue rose 9.8% to £5.7bn.

Market Movers

FTSE 100 (UKX) 6,325.83 -0.93%
FTSE 250 (MCX) 19,595.29 -0.53%
techMARK (TASX) 3,960.54 -0.58%

FTSE 100 - Risers

Morrison (Wm) Supermarkets (MRW) 185.70p 2.63%
Halma (HLMA) 2,402.00p 2.21%
Pearson (PSON) 637.20p 2.12%
Hikma Pharmaceuticals (HIK) 2,593.00p 1.85%
BAE Systems (BA.) 508.00p 1.78%
Sainsbury (J) (SBRY) 221.80p 1.51%
Croda International (CRDA) 6,098.00p 1.13%
Intermediate Capital Group (ICP) 1,748.00p 1.10%
Relx plc (REL) 1,751.50p 1.07%
Rightmove (RMV) 644.80p 1.03%

FTSE 100 - Fallers

Kingfisher (KGF) 282.90p -5.48%
Johnson Matthey (JMAT) 2,424.00p -4.94%
B&M European Value Retail S.A. (DI) (BME) 486.80p -4.32%
British Land Company (BLND) 477.90p -4.15%
Melrose Industries (MRO) 159.45p -3.89%
BP (BP.) 243.05p -3.53%
Land Securities Group (LAND) 684.00p -3.10%
Royal Dutch Shell 'A' (RDSA) 1,220.20p -3.00%
Whitbread (WTB) 3,035.00p -2.72%
Royal Dutch Shell 'B' (RDSB) 1,171.20p -2.72%

FTSE 250 - Risers

Royal Mail (RMG) 303.40p 6.08%
Serco Group (SRP) 121.40p 5.84%
Capita (CPI) 42.51p 4.45%
Centamin (DI) (CEY) 114.80p 2.82%
Trainline (TRN) 467.80p 2.63%
Chemring Group (CHG) 275.00p 2.61%
Euromoney Institutional Investor (ERM) 1,026.00p 2.60%
AJ Bell (AJB) 448.50p 2.51%
Calisen (CLSN) 183.05p 2.18%
Grainger (GRI) 307.60p 1.92%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 72.55p -8.74%
Cineworld Group (CINE) 44.22p -8.64%
Shaftesbury (SHB) 530.00p -6.53%
Investec (INVP) 191.35p -6.34%
Mitchells & Butlers (MAB) 223.50p -4.49%
SSP Group (SSPG) 313.60p -4.22%
Rank Group (RNK) 145.60p -3.83%
TBC Bank Group (TBCG) 1,266.00p -3.80%
Crest Nicholson Holdings (CRST) 311.60p -3.47%
Watches of Switzerland Group (WOSG) 463.50p -3.44%