What to watch: Intu shares plunge, UK services growth slows, De Beers diamond warning
Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:
Intu shares hit record low as landlord postpones cash call
Shares in UK shopping centre landlord Intu (INTU.L) hit a record low on Wednesday after the company abandoned its plan to raise up to £1.5bn ($1.9bn) in new equity.
Intu said that it would seek funding from other sources, consider further asset sales, and potentially request debt waivers from creditors.
Shares in the London-listed company plunged by as much as 40% following the announcement, and were down by around 27% at 11am.
The shopping centre owner is contending with a huge debt pile, and had been hoping to bolster its balance sheet by raising at least £1bn from investors.
Intu, which owns Essex’s Lakeside shopping centre, the Metrocentre in Gateshead, and the Trafford Centre in Manchester, warned that it might breach some of its debt agreements by July.
“The board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business,” it said in a statement.
“Intu will continue and broaden its conversations with its stakeholders.”
UK services sector growth slows as coronavirus hits sales
Growth in the UK services sector slowed in February, as the coronavirus outbreak began to affect sales to clients in overseas markets.
A closely watched survey by IHS Markit found that business optimism nevertheless hit its highest level since March 2015, with the sector’s purchasing managers’ index reading coming in at 53.2, just slightly below analyst expectations.
The services sector is hugely important to the UK economy — it includes finance, law, engineering and consulting — and makes up about 45% of the country’s exports.
PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.
Business activity, new orders, and employment all rose at slower rates than in January, IHS Markit said, pointing to the “negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets.”
Diamond sales hit by coronavirus, warns De Beers
One of the world’s best-known diamond dealers has warned that the coronavirus epidemic is hitting demand for the precious stones.
De Beers said on Wednesday that sales of rough diamonds had slipped recently and its chief executive blamed slumping demand in China due to the COVID-19 outbreak.
Anglo American (AAL.L), which owns De Beers, said rough diamond sales in its second sales period of the year totalled $355m (£261m). The figure was 28% lower than sales in the same period a year earlier and 35% down on sales during its first cycle of the year.
“Following an improvement in demand for rough diamonds during the first sales cycle of 2020, we recognised the impact of COVID-19 coronavirus on customers focused on supplying the Chinese market and put in place additional targeted flexibility to enable customers to defer allocations of the relevant rough diamonds,” said Bruce Cleaver, chief executive of De Beers Group.
De Beers runs 10 sales cycles per year where it sells rough diamonds. The cycles happen roughly every five weeks and the last one was during the week of 24 February.
De Beers, which is one of the oldest diamond businesses in the world, is the latest major business to be hit by the global coronavirus outbreak.
Stocks rise after Biden win and coronavirus rate cut
European stocks climbed on Wednesday as investors continued to assess the impact of Tuesday’s emergency rate cut from the Federal Reserve and former US vice-president Joe Biden’s victories in the Democratic primary.
The pan-European STOXX 600 index (^STOXX) was up by around 1.3% on Wednesday morning.
The FTSE 100 (^FTSE) climbed by 1.3% in London. Germany’s DAX (^GDAXI) was up by 1.1%, while France’s CAC 40 (^FCHI) was up by around 1.3%.
The boost to European equities followed a mixed trading session in Asia.
Two closely watched purchasing managers' indices from Hong Kong and China fell to all-time lows in February, a sign that the country has plunged into deep recession.
China’s SSE Composite Index (^SSEC) climbed by 0.6%, while the Hang Seng (^HSI) was down by around 0.2% in Hong Kong at market close.
Japan’s Nikkei (^N225) closed flat, while the KOSPI Composite Index (^KOSPI) in South Korea, where there have been more than 5,300 cases of coronavirus, closed around 2.2% in the green.
Wizz Air latest airline to cut flights due to coronavirus
Low cost airline Wizz Air (WIZZ.L) has become the latest carrier to warn on the impact of coronavirus on its business and cut back on flights.
Hungarian-based Wizz Air said on Wednesday demand for flights in Europe had been hit by the COVID-19 outbreak. As a result, it has “made adjustments” to its schedule, including cutting back on flights to Italy.
Wizz Air follows British Airways (IAG.L), EasyJet (EZJ.L), and Ryanair (RYA.L) in reducing service in recent weeks. The rapid spread of coronavirus around the world has led to slumping demand for flights.
Wizz Air said it could cut flight capacity by as much as 10% in the first quarter if coronavirus continues to put people off flying.
The company has also established a “multi-disciplinary task force to maintain a highly efficient operation and drive further savings to address the financial implications of COVID-19.”
What to expect in the US
Futures are pointing to a higher open for US stocks, which are likely to be buoyed by Biden’s slew of victories.
“Joe Biden’s Super Tuesday wins left him in a much stronger position. Bernie Sanders took the big prize of California, but the resurgence for the moderate Biden helped lift market sentiment, sending futures higher,” said Neil Wilson, the chief markets analyst at Markets.com.
S&P 500 futures (ES=F), Dow Jones Industrial Average futures (YM=F) and Nasdaq futures (NQ=F) are all up by around 2%.
