The FTSE 100 dropped sharply in opening trade as banks were told to suspend dividends and buybacks, while investors also brace for a likely global recession as a result of the coronavirus pandemic.

The UK’s benchmark index opened 3.24% lower to 5,488.27, mirroring falls seen in Asian stock markets with the Nikkei 225 in Japan down 4.5%, the Hang Seng in Hong Kong dropping 2.17% and China’s Shanghai Composite falling 0.57%.

According to the latest United Nations trade report, only India and China will be spared from a recession in the world economy, with a predicted loss of trillions of dollars of global income as a result of lockdowns and social distancing rules.

In commodities, oil prices continued to head south with brent crude futures trading 3.3% lower at $25.48 a barrel, while gold edged marginally higher to $1,593 per ounce, up 0.63% today but down around 0.5% over the past month as margin call selling keeps the gold price on hold.

BANKS AXE DIVIDENDS AND BUYBACKS

While in company news, all of the FTSE 100 banks said today they would suspend their 2019 dividends and pledged not to buy back shares, in line with a formal request from the Prudential Regulation Authority, a subsidiary within the Bank of England tasked with regulation banks, building societies and major investment firms.

It comes as central banks around the world order their countries’ commercial banks to cancel payouts to shareholders so they can support the economy through what is set to be a rather turbulent period.

The biggest faller in the group was HSBC (HSBA), which plunged 7.5% to 420p as it also warned the coronavirus pandemic will hit first-quarter revenue.

Barclays (BARC) dropped 5.3% to 89p, Royal Bank of Scotland (RBS) fell 5.45% to 107p and Lloyds (LLOY) fell 5.1% to 30p, while Standard Chartered (STAN) sank 6.4% to 417p.

Between them, the five banks were expected to pay a total of £15.6bn to shareholders.

AUTO TRADER REVERSES ON SHARE PLACING

Online car selling portal Auto Trader (AUTO) reversed 4.7% to 418p, on announcing that it would raise funds through an equity placing to bolster its balance sheet during the coronavirus crisis, and was unlikely to pay a final dividend.

Autotrader said the capital raising, for which a price would be determined via a bookbuild, would ‘ensure we avoid constraints that might otherwise be imposed in the medium term in order to meet debt covenants.’

Defence technology company QinetiQ (QQ.) fell 4.7% to 307p after it decided to defer a decision on paying a final dividend until later in the year.

PRIMARY HEALTH CONTINUES PAYING DIVIDEND

Healthcare facility owner Primary Health Properties (PHP) fell 1.5% to 158p, despite announcing that it would continue to pay its second quarterly interim dividend as planned, and that its rental collection continued to be ‘robust’.

It added that further dividend payments are still planned to be made in August and November 2020.

Estate agent Savills (SVS) dropped 4% to 792p as it withdrew dividends announced last month to conserve cash.

Still, Savills said it intended to consider an ‘enhanced’ interim dividend on or around the revised date of its annual general meeting, should conditions improve.

OTHER COMPANY NEWS

Home builder Taylor Wimpey (TW.) fell 3.1% to 114p on announcing that its executives and directors had taken a salary and bonus haircut.

Hospital owner Spire Healthcare (SPI) gained 2.4% to 80p, having secured a waiver on covenant testing from its lenders while it assists the NHS to combat the disease outbreak.

Bathroom accessory supplier Norcros (NXR) lost 0.4% to 125p after announcing that demand for its products had slowed markedly following government lockdowns in the UK and South Africa.

Engineering services group Renew Holdings (RNWH) shed 3% to 364.84p as it too decided to suspend its interim dividend.

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Issue Date: 01 Apr 2020