London open: Stocks slide as banks cancel dividends
London stocks slid in early trade on Wednesday amid growing concerns about the coronavirus outbreak, with banks under the cosh as they cancelled their dividends to help weather the pandemic.
At 0830 GMT, the FTSE 100 was down 3.2% at 5,491.18.
Nigel Frith, senior market analyst at AskTraders, said US President Donald Trump’s prediction that up to 240,000 Americans could lose their lives as a result of the virus "sent a chill down the spine of the markets".
"These numbers are truly horrifying," he said. "The Chinese Caixin PMI showed that Chinese manufacturing rebounded in March, however this news is being overshadowed by sharp falls in manufacturing in exporter nation Japan and South Korea. The fact is the numbers are likely to get worse before they get better as they are dependent on demand from Europe and US, which will slow considerably."
On the UK corporate front, banks were under pressure, with Barclays, RBS, Lloyds, HSBC and Standard Chartered all sharply lower as they suspended dividend payments due to the coronavirus. In response to a request from the Prudential Regulation Authority, the banks agreed to scrap 2020 interim dividend payments, cancel their payments for 2019 and not undertake any share buybacks on ordinary shares until the end of the year.
Shore Capital said that by taking this action, the banks could save around 50-150 basis points in core tier 1 capital over the course of the year, which can then be used to support lending into the economy.
"In addition, we believe that this action reduces the risk of potential future dilutive equity issuance to recapitalise balance sheets as a result of any losses generated due to higher impairments, while also helping to support tangible net asset values.
"We think that the UK banks entered this crisis well positioned to weather the storm with well-capitalised, well-funded and liquid balance sheets. The actions taken to suspend dividends and share buy-backs further strengthen their position. In addition, we think that the various actions being taken by governments and central banks to prop up economies by providing financial support to bank customers in the form of loan guarantees and wage support, will help to mitigate the impact on impairments relative to what could happen if no action was taken at all.
"Consequently, we think that, for once, this could turn out to be an economic crisis that does not necessarily translate into a full-blown banking crisis."
Elsewhere, Taylor Wimpey was in the red after it said executives at the housebuilder had agreed to cancel bonuses and take a 30% base salary cut for the duration of the coronavirus lockdown.
Defence company Qinetiq fell after saying it will postpone a decision on whether to pay a final full-year dividend until later in the year, when there is greater clarity on the impact of Covid-19.
Auto Trader retreated as it announced a share placing equal to 5% of its share capital and reductions to directors' pay to strengthen its finances during the Covid-19 crisis.
Real estate agent Savills was weaker after saying it was pulling its final and supplemental interim dividends to save cash in response to the coronavirus pandemic.
FTSE 100 - Risers
easyJet (EZJ) 585.40p 2.52%
Intermediate Capital Group (ICP) 895.00p -0.17%
Coca-Cola HBC AG (CDI) (CCH) 1,731.50p -0.32%
Fresnillo (FRES) 664.20p -0.39%
Experian (EXPN) 2,238.00p -0.58%
Hikma Pharmaceuticals (HIK) 2,023.00p -0.59%
SEGRO (SGRO) 759.00p -0.65%
Aveva Group (AVV) 3,468.00p -0.74%
International Consolidated Airlines Group SA (CDI) (IAG) 213.20p -0.88%
Sage Group (SGE) 586.40p -0.91%
FTSE 100 - Fallers
Legal & General Group (LGEN) 178.15p -8.10%
Standard Life Aberdeen (SLA) 206.30p -7.86%
HSBC Holdings (HSBA) 419.10p -7.74%
Aviva (AV.) 251.20p -6.44%
Prudential (PRU) 970.20p -6.31%
Carnival (CCL) 924.40p -5.81%
Standard Chartered (STAN) 420.70p -5.63%
Barclays (BARC) 89.00p -5.43%
Meggitt (MGGT) 275.90p -4.96%
Lloyds Banking Group (LLOY) 30.42p -4.94%
FTSE 250 - Risers
Aston Martin Lagonda Global Holdings (AML) 68.00p 6.82%
RHI Magnesita N.V. (DI) (RHIM) 2,148.00p 4.78%
Petropavlovsk (POG) 21.55p 1.89%
Murray International Trust (MYI) 878.00p 1.39%
Ultra Electronics Holdings (ULE) 2,028.00p 1.00%
Kingfisher (KGF) 144.90p 0.69%
Derwent London (DLN) 3,284.00p 0.43%
Contour Global (GLO) 145.20p 0.28%
Dunelm Group (DNLM) 708.00p 0.21%
PZ Cussons (PZC) 192.40p 0.21%
FTSE 250 - Fallers
Ashmore Group (ASHM) 315.00p -11.72%
FDM Group (Holdings) (FDM) 671.00p -9.20%
Morgan Sindall Group (MGNS) 1,122.00p -6.50%
Cineworld Group (CINE) 46.48p -6.35%
JPMorgan American Inv Trust (JAM) 364.00p -6.31%
OneSavings Bank (OSB) 235.40p -6.14%
LXI Reit (LXI) 102.20p -6.07%
Senior (SNR) 66.05p -5.98%
Sirius Real Estate Ltd. (SRE) 62.00p -5.92%
Smithson Investment Trust (SSON) 1,090.00p -5.71%