London close: Investors remain concerned despite stimulus measures in UK

"Its Déjà vu for European equity markets as they started out strong but as we approach the close of business they are firmly in the red. The same old health fears are doing the rounds, and that is driving the bearish sentiment," commented David Madden at CMC Markets UK.

The FTSE 100 ended down 1.40% to 5,876.52, just a tad above its worst level of the session, erasing an earlier bounce following the BoE's announcement of a 50 basis point interest rate cut that was designed to counter the "economic shock" from the coronavirus pandemic.

Rate-setters voted unanimously to cut rates to an all-time low of 0.25%.

Bank also announced a new Term Funding plan to help small and medium-sized enterprises, financed by central bank reserves.

In a statement, policymakers at the Old Lady of Threadneedle Street said: "Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months."

Shortly afterwards, the Chancellor unveiled fiscal stimulus for 2020 worth £30bn or 1.3% of gross domestic product and roughly another 0.7% of GDP for 2021.

"The coordinated monetary and fiscal response to COVID-19 is sizeable and will make a difference as the UK is hit by the COVID-19 disruptions," said Kallum Pickering at Berenberg.

Earlier, the latest data from the Office for National Statistics showed that the UK economy stagnated in the three months to January as an uptick in construction failed to offset weakness in manufacturing and services.

Gross domestic product was flat in the rolling three month-period, compared to 0.1% growth in December. GDP was also flat on a month-to-month basis in January, missing forecasts for growth of around 0.2%.

Total production output decreased 1.0% in the three-month period, the ninth consecutive three-month fall in output and the longest run of consecutive periods of weakness since an 11-period run starting in September 2011.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "January’s GDP data are weak enough to suggest that the MPC probably would have cut interest rates anyway later this month, had the coronavirus never spread to Britain."

He said activity had not rebounded as business surveys implied.

Stateside, US Treasury Secretary, Steve Mnuchin, said he would recommend to the President a delay in tax payments for all Americans, save the super rich.

A broader fiscal stimulus would first need to pass Congress and would take longer, he added.

Investors were also waiting on a potentially key policy announcement from the European Central Bank due out the next day.

In the background, investors were closely watching key technical support levels for the US S&P 500, especially the 200-week moving average which came in at approximately 2,640 points.

On home shores, BT Group topped gainers on the top-flight index after the Chancellor confirmed plans to invest £5bn on rolling out full-fibre broadband across Britain - a major plank of the Conservative election manifesto.

Firms with Asia exposure like Schroders and HSBC also found a bid, after the World Health Organisation reported a further dip in daily new confirmed coronavirus cases China in its 50th update on the outbreak to just 20.

Balfour Beatty surged after it reported an 8% increase in annual operating profit as the infrastructure group increased sales and orders.

Housebuilders on the other hand reversed earlier gains, with Taylor Wimpey, Persimmon, Barratt Developments and Berkeley all lower.

Stock in security services company G4S was walloped a day after posting a drop in full-year pre-tax profit and saying it swung to a loss on a statutory basis as it took a £291m charge related to its UK cash business. The shares were also hit by a rating downgrade at Citi.

Travel-related stocks were also down sharply, with easyJet and IAG pacing losses.

According to JP Morgan, based on the latest IATA forecast for a 6-10% fall in global air traffic in 2020, versus declines of 2.6%, 2.9% and 1.1% in 1991, 2001 and 2009, respectively, the impact of COVID-19 on traffic could be similar to - but not worse than - 9/11.

"[...] All airlines will seek to preserve cash and many weaker airlines are likely to go bankrupt."

Market Movers

FTSE 100 (UKX) 5,876.52 -1.40%
FTSE 250 (MCX) 17,339.23 -1.18%
techMARK (TASX) 3,483.91 -1.35%

FTSE 100 - Risers

BT Group (BT.A) 122.64p 2.59%
Schroders (SDR) 2,419.00p 2.46%
HSBC Holdings (HSBA) 485.50p 1.46%
Land Securities Group (LAND) 771.00p 1.23%
RSA Insurance Group (RSA) 481.50p 1.13%
Barclays (BARC) 117.94p 0.94%
Admiral Group (ADM) 2,094.00p 0.77%
Ocado Group (OCDO) 1,079.00p 0.65%
GlaxoSmithKline (GSK) 1,522.60p 0.53%
Hikma Pharmaceuticals (HIK) 1,828.50p 0.52%

FTSE 100 - Fallers

Aveva Group (AVV) 3,358.00p -9.34%
Coca-Cola HBC AG (CDI) (CCH) 1,981.50p -8.39%
easyJet (EZJ) 925.00p -7.59%
Kingfisher (KGF) 159.15p -6.19%
Smiths Group (SMIN) 1,180.00p -5.71%
WPP (WPP) 640.80p -5.68%
International Consolidated Airlines Group SA (CDI) (IAG) 396.90p -5.45%
Carnival (CCL) 1,579.50p -5.35%
Compass Group (CPG) 1,364.00p -5.18%
JD Sports Fashion (JD.) 606.20p -5.04%

FTSE 250 - Risers

Balfour Beatty (BBY) 264.60p 19.84%
Aston Martin Lagonda Global Holdings (AML) 219.10p 10.85%
Tullow Oil (TLW) 18.12p 10.79%
Galliford Try (GFRD) 138.50p 6.65%
Clarkson (CKN) 2,330.00p 5.67%
Sabre Insurance Group (SBRE) 281.50p 5.51%
Domino's Pizza Group (DOM) 324.50p 5.19%
Avon Rubber (AVON) 2,365.00p 4.42%
Quilter (QLT) 138.65p 4.41%
Cairn Energy (CNE) 74.75p 4.18%

FTSE 250 - Fallers

Finablr (FIN) 22.56p -25.10%
G4S (GFS) 102.70p -22.64%
PPHE Hotel Group Ltd (PPH) 1,340.00p -10.67%
Avast (AVST) 344.40p -8.36%
Cineworld Group (CINE) 88.40p -7.94%
Wizz Air Holdings (WIZZ) 3,112.00p -7.82%
Helios Towers (HTWS) 98.20p -7.79%
Provident Financial (PFG) 319.80p -7.25%
GVC Holdings (GVC) 650.20p -6.58%
Britvic (BVIC) 767.00p -6.58%