London close: Dividend stocks and defensive issues pace gains

London stocks extended their gains on Wednesday, taking their cue from Wall Street, where sentiment appeared to steady a tad after Democratic party presidential candidate Joe Biden scored multiple wins in party primaries in the South, beating rival Bernie Sanders and reviving his campaign which just a couple of days before had appeared to be doomed.

In the background, investors mulled a surprise 50 basis points rate cut by the Federal Reserve the day before, which was followed by Bank of Canada on Wednesday with an identical move and pondered who might be next.

The FTSE 100 finished up 1.45% at 6,815.59 while the second-tier index added 0.31% to 19,742.83.

Stocks on Wall Street fell sharply on Tuesday after the Fed announced an emergency rate cut - its the first since the financial crisis in 2008 - to help counter the impact of the coronavirus.

IG chief market analyst Chris Beauchamp said: "The Bank of Canada has joined in the procession of global central banks easing policy, with cut in rates of 50 basis points, while indices have managed to find more positives in the Fed’s cut yesterday than they did in the immediate aftermath of the move.

"The Dow continues to seesaw between big gains and big losses, as markets feverishly try to work out what happens next."

Services data in focus

Investors were also digesting the latest data out of China, which showed that activity in the services sector crashed in February, resulting in its worst month on record, as the coronavirus outbreak saw business grind to a halt, although satellite imagery showed that factory activity appeared to be recovering since mid-February.

Services data was also in focus on home turf. The IHS Markit/CIPS UK services PMI business activity index came in at 53.2 in February. The reading has now been above the neutral mark of 50.0 for two successive months, indicating growth, and is the second-highest since September 2018.

However, it was also marginally below January’s reading of 53.9, as well as consensus and the flash estimate, both of which were 53.3.

The main headwind cited by respondents was the coronavirus outbreak, through booking cancellations and delays to new projects among clients in Asia. There was also a renewed fall in total orders from abroad.

Chris Williamson, chief business economist at the same survey compiler, said: "The post-election rebound in service sector growth lost some of its bounce in February, in part are due to coronavirus-related disruptions to sectors such as travel and tourism, but continued to expand at a encouragingly robust pace."

Reckitt and grocers gain on reports of hoarding

In equity markets, Reckitt Benckiser topped the leaderboard on the Footsie after analysts at Barclays said they spied opportunities in the wake of the recent indiscriminate selloff in stocks, singling out the consumer goods giant as especially undervalued for investors with a medium-term investment horizon.

Grocers also advanced amid reports of products flying off the shelves as scared consumers stockpiled sanitary products, alongside several of the top flight index's top dividend payers, including the likes of Vodafone, SSE, Imperial Brands or AstraZeneca.

Some City-based traced the move in Reckitt back to those same reports.

Stock in DS Smith was also in the plus column as the packaging company said it had continued to progress "well" in the third quarter despite macroeconomic uncertainty, with corrugated box volume growth up in the second half of the year. Peers Smurfit Kappa and Mondi also racked up healthy gains.

Legal & General reversed earlier losses after posting a better-than-expected rise in full-year operating profit.

BHP was boosted by an upgrade to ‘overweight’ at JPMorgan and Rio Tinto was up after an upgrade to ‘buy’ at Societe Generale, with miners in general racking up healthy gains.

On the flip side, financials were broadly lower on the FTSE 100 as central banks continued to lower rates, with Bank of Canada the latest to do so on Wednesday, although Asia-focused names HSBC (also a top dividend payer) and StanChart bucked the trend.

Also moving to the downside, British Airways parent IAG and Premier Inn owner Whitbread were weaker as worries about the impact of the coronavirus continued to weigh on the travel and leisure sector, although shares in the former had recently enjoyed a small bounce.

As an aside, in a research note sent to clients on Restaurant Group, analysts at Peel Hunt noted declining UK airport passenger volumes.

Genus was the top gainer on the second-tier index, hitting a fresh record high on the back of an update from sausage skin manufacturer Devro which reported that its factory in Nantong, China, had returned to normal production.

Hill & Smith and Elementis were both trading up after well-received results, while Sirius Minerals vaulted higher after shareholders voted on Tuesday in favour of Anglo American's £405m takeover, safeguarding its North Yorkshire polyhalite project.

Budget airline Wizz Air was in the red after saying it was considering a 10% cut to capacity in the first quarter of the next fiscal year to counter the impact of the coronavirus, having already reduced flights to Italy.

Outside the FTSE 350, shares of shopping centre owner Intu Properties tumbled after it cancelled a £1bn to £1.5bn equity raising due to "the current uncertainty in equity markets".

Market Movers

FTSE 100 (UKX) 6,815.59 1.45%
FTSE 250 (MCX) 19,742.83 0.31%
techMARK (TASX) 3,892.37 1.32%

FTSE 100 - Risers

Reckitt Benckiser Group (RB.) 6,100.00p 5.43%
Vodafone Group (VOD) 139.58p 4.54%
Morrison (Wm) Supermarkets (MRW) 183.75p 4.34%
SSE (SSE) 1,643.00p 4.12%
AstraZeneca (AZN) 7,455.00p 3.95%
Imperial Brands (IMB) 1,643.80p 3.79%
Standard Chartered (STAN) 558.40p 3.75%
National Grid (NG.) 1,050.00p 3.61%
Centrica (CNA) 76.34p 3.50%
GlaxoSmithKline (GSK) 1,663.80p 3.47%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 607.40p -4.47%
TUI AG Reg Shs (DI) (TUI) 582.60p -4.30%
Whitbread (WTB) 3,620.00p -3.93%
International Consolidated Airlines Group SA (CDI) (IAG) 447.00p -3.75%
Ashtead Group (AHT) 2,325.00p -3.45%
Compass Group (CPG) 1,657.00p -3.27%
Hargreaves Lansdown (HL.) 1,474.00p -2.47%
JD Sports Fashion (JD.) 723.80p -2.06%
St James's Place (STJ) 995.40p -2.03%
Rightmove (RMV) 613.60p -1.92%

FTSE 250 - Risers

Sirius Minerals (SXX) 5.49p 17.46%
Genus (GNS) 3,612.00p 5.74%
TI Fluid Systems (TIFS) 205.50p 5.17%
Senior (SNR) 151.90p 4.69%
Hill & Smith Holdings (HILS) 1,440.00p 4.65%
Telecom Plus (TEP) 1,400.00p 4.63%
Cineworld Group (CINE) 139.60p 4.22%
Pennon Group (PNN) 1,181.50p 3.59%
Fisher (James) & Sons (FSJ) 1,892.00p 3.50%
Trainline (TRN) 491.50p 3.36%

FTSE 250 - Fallers

Signature Aviation (SIG) 266.00p -6.11%
Restaurant Group (RTN) 93.05p -5.34%
Hammerson (HMSO) 191.20p -4.73%
William Hill (WMH) 139.75p -4.48%
Travis Perkins (TPK) 1,413.50p -4.01%
SIG (SHI) 58.35p -3.87%
Man Group (EMG) 144.65p -3.76%
Playtech (PTEC) 233.50p -3.71%
Vesuvius (VSVS) 415.00p -3.62%
Tullow Oil (TLW) 31.41p -3.59%