By Sruthi Shankar and Devik Jain
(Reuters) - London's stock markets tumbled on Wednesday as banking shares dived after suspending dividend payments, while plunging factory activity in Britain and elsewhere underlined the severe economic impact of the coronavirus pandemic.
Shares of Barclays (L:BARC), HSBC (L:HSBA), Lloyds Banking Group (L:LLOY), Royal Bank of Scotland (L:RBS) and Standard Chartered (L:STAN) dropped between 5% and 12%, dragging the FTSE 100 (FTSE) lower by 3.8%.
The lenders said on Tuesday they would halt dividends, bowing to pressure from the regulator, to save their capital as a buffer against potential losses from the virus outbreak.
"We worry that the move undermines confidence in the regulatory framework and raises cost of capital," BofA Global Research's Rohith Chandra-Rajan wrote in a client note, adding he expected no payouts from domestic UK banks until 2021.
Commodity miner Glencore (L:GLEN) fell 3.7% as it delayed its $2.6 billion dividend pay out for this year and said there could be material disruption to production due to the coronavirus.
The FTSE 100 recorded its worst quarter since 1987 on Tuesday amid growing evidence of pain for businesses and economic growth from the pandemic that led to a 27% increase in the number of deaths in Britain on Tuesday.
Despite policymakers injecting trillions of dollars into the global economy, the blue-chip index is down about 29% from its Jan. 17 peak, while an index of mid-cap shares (FTMC) are more than 34% below all-time highs.
Factory activity data from the UK echoed that of Asia and Europe, with output from Britain's manufacturing sector in March shrinking at the fastest pace since the euro zone debt crisis.
Wall Street also dropped as data showed new factory orders slumped to an 11-year low last month, adding to woes after U.S. President Donald Trump warned the country faced a tough two weeks ahead in its battle against the coronavirus. (N)
"What the market really wants to see is the number of cases and deaths starting to come down in Europe and the United States and the impact of the lockdown on companies," said Roland Kaloyan, head of European equity strategy at Societe Generale (PA:SOGN).
"It is not so well known. Two-thirds of European companies have not changed or withdrawn guidance."
Companies listed on the pan-European STOXX 600 (STOXX) are expected to report a 21.9% decline in earnings in the second quarter, according to Refinitiv data, down from a 14.9% drop forecast the week before.
Oil major BP Plc (L:BP) fell 3.1% after rating agency Moody's cut its outlook to "negative". The company also slashed its 2020 spending plan by 25% and will reduce output from its U.S. shale oil and gas business in the wake of a collapse in oil prices.
Online car market place Auto Trader (L:AUTOA) dropped 11% after saying it would sell new shares worth 5% of its capital to shore up its finances and liquidity position.