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FTSE 100 on track for weekly loss, insurers slide on dividend woes

Credit: REUTERS/TOBY MELVILLE

By Devik Jain and Sruthi Shankar

April 3 (Reuters) - UK's FTSE 100 was on course for its fifth weekly decline in six on Friday as insurers tumbled after their European Union counterparts were asked to suspend dividend payments to weather the economic hit from the coronavirus pandemic.

The blue-chip index .FTSE fell 1.2%, with shares in Legal & General LGEN.L, Aviva AV.L and Prudential PRU.L down between 4.4% and 7.0% after the EU regulator asked insurers and reinsurers to temporarily suspend dividends and share buybacks.

"The action from the European Central Bank and the Bank of England in relation to bank dividend should have been a warning for insurers," CMC Markets analyst David Madden said. "In this day and age, you want to make sure that you're as liquid as possible."

With many firms announcing freezes or cuts in their payout policies notably in the banking sector, Barclays on Wednesday forecast that dividend paid by companies listed on the pan-European STOXX 600 index .STOXX will fall by about 40% this year.

The domestically focused midcap index .FTMC dropped 1.3%, with shares of information services provider Ascential ASCL.L tumbling 7.4% as it scrapped its 2019 dividend and said it was commercially not viable to run the Cannes Lions Festival this year.

Both the major indexes are on course to log weekly losses as data from across the world confirmed investor fears of a sharp economic slump driven by the virus outbreak.

After Thursday's numbers showed another record surge in U.S. weekly jobless claims, investors are awaiting employment data that is expected to show the U.S. economy shed jobs in March.

"I don't think it's going to have a lasting impact on the market, just because traders know that the situation is bad and is going to become dire," CMC's Madden said.

Meanwhile, UK's services sectors activity suffered its biggest slump by far since 1996, a survey showed, with much of the economy in a shutdown.

Shares in BP BP.L and Royal Dutch Shell RDSa.L fell slightly as oil prices reversed early losses, with hopes of a huge global supply cut deal between Saudi Arabia and Russia to support prices still alive. O/R

Defence company BAE Systems BAES.L dropped 2.3% on deferring a decision on whether to pay its dividend and said it had launched cost control measures after seeing significant disruption.

London's bus operators First Group FGP.L, Go-Ahead Group GOG.L, National Express NEX.L and Stagecoach Group SGC.L gained between 2% and 5% as they welcomed 167 million pounds in aid from the government to keep commuter services running for essential staff.

(Reporting by Devik Jain and Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Shounak Dasgupta)

((Devik.Jain@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2062; ;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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