Boris would rather tariffs than EU rules; China resumes trading. 

4 February 2020

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Market news

Boris Johnson's statement that he would rather suffer tariffs with the EU than have the UK follow EU rules renewed fears of a hard Brexit yesterday, handing sterling its worst day in seven weeks. The pound dropped 1.5% against the dollar and 1.2% against the euro. Johnson praised the EU-Canada trade deal, which has no tariffs on most goods, but added there was “no need” to follow Brussels' rules. 

The EU also outlined its negotiating position, as Michel Barnier emphasized the importance of a level playing field and the integrity of the single market. The EU does not want to be undercut in areas such as environmental or competition policy. 

The FTSE 100 is over 1% higher this morning, helped by the weaker pound, while other global equities are also stronger today. China's stock market has rebounded somewhat from its 8% dive yesterday, when trading resumed after an extended break due to the coronavirus. More than 2,500 stocks fell by the daily limit of 10% but The People's Bank of China has injected billions of dollars of cash into the market this week, with no end in sight for the country's lockdown. The death toll in China has now eclipsed that of the SARS outbreak. 

Oil prices have been severely affected by the coronavirus too, owing to the significant hit to demand from China. Brent crude fell 4% yesterday and has now fallen more than 20% from a peak of over $68 per barrel last month, putting the commodity in bear market territory. This is in spite of OPEC considering emergency output cuts. 

UK manufacturing has ended its longest run of contractionary months since the financial crisis, registering a score of 50 - denoting no change - in the latest IHS Markit Purchasing Managers' Index (PMI). It has also been revealed that a global aggregate of PMIs hit a nine-month high in the lead-up to the coronavirus outbreak. 

Stock focus

BP has raised its dividend despite reporting a 65% fall in annual profits this morning. The oil giant suffered at the hands of lower oil and gas prices and about $6bn in write-offs on the value of assets it has agreed to sell in America. Underlying profit, however, fell less than expected. Bob Dudley, the outgoing chief executive, hands over the reigns to Bernard Looney tomorrow. 

Alphabet shares fell over 4% in after-market trading last night, after the tech giant's fourth-quarter earnings fell short of Wall Street expectations. Its revenue growth of 17% was in fact its slowest fourth-quarter growth in four years, while net profits rose 19% to $10.7bn. The company cited the many cutting-edge technologies that make up the platform for its future growth. 

Apple announced its own fourth-quarter figures last week, revealing that sales of the iPhone 11 propelled the company to record revenues and profits. The $91.8bn surpassed analysts' expectations and comes amid complications in its reliance on China for both production and demand growth. In the context of the spreading coronavirus, the company has restricted employee travel to “business critical” and closed one store in China. 

Michael O'Leary has admitted that Ryanair's target of flying 200m passengers a year will likely be delayed by the problems with Boeing's 737 Max aeroplane. O'Leary does not expect to have any of the new fleet delivered before next summer, when 55 are due to arrive 12 months later than planned. It currently has a fleet of 470 planes. 

Micro Focus announced the departure of its chief executive along with its full-year statement this morning, which included a 41.2% drop in operating profit. Kevin Loosemore has led the company since it floated 15 years ago, but investors had been growing increasingly dissatisfied with performance. The share price has fallen 60% since last July.

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