After another bright start to the trading day, the FTSE 100’s shrunk back again in afternoon trade. It’s now down below 5,950 points on yet more worrying news concerning the coronavirus spread. Investors are less bothered about the Bank of England’s interest rate cut than they are about news of rising infection rates.
Some scary comments from German Chancellor (and former scientist) Angela Merkel have ramped up selling in midweek trading, too. She advised that up to a whopping 70% of the Central European country’s population could become infected.
The prospect of 58m citizens in the eurozone’s largest economy falling ill doesn’t bear thinking about. Economic conditions in Germany have been steadily deteriorating over the past year, and the COVID-19 shock threatens to almost certainly send the country – not to mention the wider euro bloc – into a punishing recession.
More bad news
At 1,457 cases, the infection rate in Germany stands at almost four times of that in the UK at present. But Merkel’s predictions should give Britons plenty to fear too. Comments from British medical experts and politicians have been much less alarming, sure. But her statement shows just how defenceless Western nations are to stop the coronavirus turning into an all-out epidemic.
It’s perhaps not a shock that retailers are suffering much of the brunt right now. Pictures of mass panic buying in supermarkets may be plastered all over newspapers and social media right now. But with people isolating themselves in ever-larger numbers – whether they carry the coronavirus or not – retail sales in the UK have taken a whack.
It’s not been all bad for British retailers, however. Indeed, those operating online have snapped up much of the business lost by physical retailers, as British Retail Consortium figures show. Sales of non-food items across stores fell 1.8% in February while retail revenues online jumped 3.6%.
Cash crisis
The timing of this news couldn’t be much worse for battered FTSE 100 stock Intu Properties (LSE: INTU). The creep of e-commerce, combined with a steady stream of retail collapses as Brexit smacked consumer confidence, has caused losses to balloon in recent times. The emergence of the coronavirus, and with it further declines in physical retail footfall, has raised more concern over its ability to fix its battered balance sheet.
The shopping centre owner was forced to cancel a much-needed £1.3bn cash call last week on what it called “current uncertainty in the equity markets and retail property investment markets.” Intu has a mountain of debt on its books that it is struggling to cope with. Its debt-to-asset ratio sat at a mighty 68% as of December. It clearly doesn’t need to be faced with a spike in the number of retail insolvencies or CVAs because of the COVID-19 crisis.
Intu’s now dealing at record lows below 6p per share. But you’d have to be extremely brave (or extremely silly) to buy its shares today. I’d much rather go dip buying elsewhere on the FTSE 100 today.
